Dental Practice Not Permitted to Recover Under All-Risk Policy Relative to COVID-19 Pandemic

In the case of Brian Handel, D.M.D., P.C. v. Allstate Ins. Co., No. 20-3198 (E.D. Pa. Nov. 6, 2020 Bartle, J.), the court found that the Plaintiff, which was a Pennsylvania dental practice, had failed to plead plausible facts that the restrictions placed upon the practice due to the COVID-19 pandemic caused damage or loss in any physical way to its property so as to trigger coverage under its “all-risk” insurance policy with the Defendant. 

The court noted that the dental office had been required to close its practice under the governmental orders related to the pandemic. Thereafter, the dental practice made a claim against the insurance company under the “all-risk” insurance policy for claims of business income loss and extra expenses due to the interruption of the dental practice due to the COVID-19 pandemic.

The dental practice filed this declaratory judgment action and a breach of contract. Allstate moved to dismiss the Plaintiff’s Complaint for failure to state a claim and this motion was granted.

The court noted that, under the subject insurance policy, Allstate had agreed to pay for “direct physical loss of or damage to covered property…caused by or resulting from any covered cause of loss.”

The policy defined a “covered cause of loss” as a “direct physical loss unless the loss is excluded or limited under Section 1-Property.” 

In response to the Plaintiff’s claims, the District Court noted that the Governor’s order did not require dental offices such as the Plaintiff's office to close completely. Rather, the Plaintiff’s practice was able to remain open for emergency procedures. As such, the court found that the dental practice/property remained inhabitable and usable, albeit in limited ways.

As such, the court found that the Plaintiff failed to plead plausible facts that COVID-19 caused damage or loss in any physical way to the property so as to trigger the coverage.

The court also found that the Plaintiff’s claim of coverage pursuant to the Civil Authority Provision of the policy also failed. Under that provision, Allstate was obligated to cover the loss of business income and necessary expenses when a “covered cause of loss” damage property in the immediate area and a civil authority prohibited access to the covered property.

The court found no facts pled of any direct physical loss of prohibited access to the property. As such, the court found that the Plaintiff could not sustain a claim for coverage under the Civil Authority Provision of the policy based upon the COVID Pandemic.

The court went on to note that, even if the Plaintiff had pled sufficient facts for physical damage or loss as a result of the pandemic, the Plaintiff’s claims were still barred by the virus exclusion provision of the policy. Under that exclusion, it was provided that the carrier would not cover loss or damage if caused, either directly or indirectly by “any virus, bacterium, or other microorganism that induces or is capable of inducing physical stress, illness, or disease.” 

In the end, the District Court granted the carrier’s Motion to Dismiss.

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Source: “Digest of Recent Opinions.” Pennsylvania Law Weekly (Nov. 24, 2020).