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PA Court Holds COVID-19 Excluded From “Property Damage” Coverage Under All-Risk Property Insurance Policy

January 14, 2022

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<p style="text-align: justify;">In a recent case from the Eastern District of PA,<em> <a href="https://www.wcmlaw.com/wp-content/uploads/2022/01/Maggios-Famous-Pizza-Inc.-v.-Selective-Ins.-Co.-of-the-Sw..pdf">Maggios Famous Pizza, Inc. v. Selective Ins. Co. of the Sw.</a></em>, the court granted the defendant’s summary judgment against the plaintiff who sought coverage under an all-risk property policy. Finding that COVID-19 related loss of business did not qualify as actual damage to the property required by the policy.  The plaintiff in the case owned a large pizza and dining restaurant. The Pennsylvania Governor instituted a stay at home order in response to the COVID-19 pandemic. The large establishment was limited to takeout and delivery. Prior to the pandemic, the plaintiffs purchased property insurance from an insurance company in 2019. The plaintiff subsequently submitted a claim for “losses caused by the COVID-19,” which was denied by the defendant insurance company.</p>
<p style="text-align: justify;">The court found in favor of the insurer finding that the Insurance policy does not cover the losses caused by COVID-19. After reviewing the policy as written, the court reasoned this outcome based on three different theories. First, the insurance policy does not cover pure economic loss. The plaintiff’s policy covers direct physical loss to the property, here although the plaintiffs were limited in conducting business the property did not suffer damage. Second, the policy as written requires physical loss, not a loss of certain uses. The plaintiff’s claimed that when they were forced to serve only takeout, they lost used of the physical property. Again, the policy only is activated for physical damage to the property. Lastly, the insurance policy expressly excludes coverage for all losses caused by virus. The insurance policy is an “all-risk “policy, meaning it pays for all sources of damage except sources that are specifically excluded. Although not the insurance company’s intention, COVID-19 is a virus and consequentially falls under the exclusion.</p>
<p style="text-align: justify;">The insurer’s policy language dictates this outcome even if it is an all-risk policy.  The exclusion was properly interpreted by the Court and denied the Covid-19 “property” claims.</p>
<p style="text-align: justify;">Thanks to Kevin Riley for his contribution to this article.  Should you wish to discuss Covid-19 insurance claims, feel free to contact <a href="mailto:tbracken@wcmlaw.com">Thomas Bracken</a>.</p>

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