<p style="text-align: justify;">The Eastern District of Pennsylvania recently dealt with an attorney filing a lawsuit after her law firm was forcibly shut down as a result of the Coronavirus pandemic. In <em><a href="https://www.wcmlaw.com/wp-content/uploads/2020/10/Rhonda-Hill-Wilson-et-al.-v.-Hartford-Casualty-Co.-et-al..pdf">Rhonda Hill Wilson, et al. v. Hartford Casualty Co., et al.</a></em> the District Court granted the defendants’ motions to dismiss for failure to state a claim after determining that the plaintiffs’ claims were barred by the virus exclusion within the insurance policy.</p>
<p style="text-align: justify;">Rhonda Hill Wilson and The Law Office of Rhonda Hill Wilson (“Plaintiffs”) alleged that Hartford Casualty Company (“Hartford”) and USI Insurance Services, LLC (“USI”) breached their insurance contract by denying their claim for insurance coverage arising from the interruption of their business caused by the Coronavirus and resulting governmental closure orders. Specifically, the policy includes Civil Authority coverage for business interruptions caused by order of a civil authority, Lost Business Income & Extra Expense coverage, Extended Business Income coverage, and Business Income Extension for Essential Personnel coverage, as well as Limited Fungi, Bacteria, or Virus coverage.</p>
<p style="text-align: justify;">The Civil Authority provision of the policy applied to the actual loss of business income sustained when access to the policyholder’s scheduled premises is prohibited by order of a civil authority as the direct result of a Covered Cause of Loss to property in the immediate area of the scheduled premises. Additionally, the policy provided coverage to pay for lost business income due to the required suspension of a policyholder’s operations, whether the loss was the result of a civil authority order or not. However, the suspension must be the result of direct physical loss of or physical damage to property at the scheduled premises, caused by or resulting from a Covered Cause of Loss.</p>
<p style="text-align: justify;">Here, the Plaintiffs claimed they suffered a Covered Cause of Loss to property because the Coronavirus caused direct physical damage and loss of property at their scheduled premises. Specifically, the physical harm to the property consisted of impairment of its value, usefulness, and/or normal function and rendered the property unsafe and unusable. Additionally, the Plaintiffs alleged that the Limited Fungi, Bacteria, or Virus Coverage applied because it was “probable that COVID-19 particles have been present at Plaintiffs’ building and premises.” Finally, the Plaintiffs claimed to have suffered substantial business income and other financial losses.</p>
<p style="text-align: justify;">Ultimately, the District Court determined that a virus exclusion applied and Plaintiffs did not fall within any exemption to that exclusion. The District Court relied upon fundamental contract interpretation and the clear and unambiguous language of the policy in reaching its decision. Specifically, the Hartford policy stated that it “will not pay for loss or damage caused directly or indirectly by . . . [p]resence, growth, proliferation, spread or any activity of ‘fungi’, wet rot, dry rot, bacteria or virus.” Additionally, the policy language states that the exclusion applied despite any other cause or event that contributes concurrently or in any sequence to the loss as well as whether or not the loss event results in widespread damage or affects a substantial area.</p>
<p style="text-align: justify;">Additionally, the District Court opined that, to the extent that Plaintiffs allege that the governmental closure orders are a separate cause of loss, they failed to provide an explanation as to why the Civil Authority coverage would not be precluded by the virus exclusion. In fact, the District Court stated that, even if Plaintiffs could provide such an explanation, the virus exclusion would still bar coverage because of the anti-concurrent causation clause within the virus exclusion stating that such a loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss. Determining that the unambiguous virus exclusion applied, the District Court granted Hartford’s Motion to Dismiss. The District Court also granted USI’s Motion to Dismiss for the same reasons as well as for Plaintiffs failure to plead any independent wrongdoing by USI.</p>
Overall, the main takeaway from this lawsuit is the significant barriers to coverage when a virus exclusion is incorporated into an insurance policy. Additionally, this case once against emphasizes the importance of clear and unambiguous language within an insurance policy, this time demonstrated through a virus exclusion.
Thanks to Zhanna Dubinsky for her contribution to this post. Any questions, please contact <a href="mailto:firstname.lastname@example.org">Georgia Coats</a>.