Superior Court Addresses Business Interruption Coverage Case Related to Pandemic Closures

In the case of The Scranton Club v. Tuscarora Wayne Insurance Company, No. 238 MDA 2021 (Pa. Super. Sept. 12, 2023 Panella, P.J., Olson, J., and Kunselman, J.) (Op. by Kunselman, J.) (non-precedential)(Olson, J., Concurring), the Pennsylvania Superior Court affirmed in part and reversed in part a trial court’s decision sustaining Preliminary Objections filed by Tuscarora Wayne Mutual Group, Inc. regarding business interruption coverage issues arising out of the COVID-19 pandemic governmental closings of businesses.

In this matter, the Scranton Club was seeking a declaration that its insurance policy provided coverage for the losses sustained, including business income, during the pandemic.

In the time since the trial court’s decision was handed down, the Pennsylvania Superior Court held in the case of Ungarean v. CNA that the mere loss of the ability to use one’s property could constitute “direct physical loss of damage” to the property for purposes of business interruption insurance claims based upon governmental required closures during the pandemic.

It is parenthetically noted that, on July 13, 2023, the Pennsylvania Supreme Court granted a Petition for Allowance of Appeal in the Ungarean case, as well as another COVID-19 business interruption case with a contrary result, in order to decide the split of authority on that coverage issue.

In this case involving the Scranton Club, the Majority of the Superior Court panel affirmed the trial court’s rulings regarding the Virus Exclusion. In that regard, the trial court had denied the carrier’s request to dismiss the case as a matter of law based upon the Virus Exclusion in the policy since the Exclusion did not contain anti-concurrent causation language and, instead, used wording that required the application of an efficient proximate cause or concurrent causation standard. In this regard, the trial court found that the causation issued had to be decided by the jury rather than by the court as a matter of law.

The appellate court in this case involving the Scranton Club also affirmed the trial court’s ruling regarding the civil authority coverage. The trial court had ruled that coverage was not available to the insured under the civil authority coverage since that the required government closures due to the damage condition of neighboring properties, not the insured’s property.

However, based upon the Superior Court’s previous decision in Ungarean, the Superior Court reversed the trial court’s holding on the “direct physical loss of damage” issue. 

The trial court had held that there was no business income or building damage coverage based upon that policy provision due to the Scranton Club’s failure to allege any physical loss or damage to its property and its allegation that the virus was never present on the property.  As noted, the trial court had issued its decision based upon precedent that existed at the time that supported the trial court’s decision, with precedent has since changed.

In this case involving the Scranton Club, the Pennsylvania Superior Court re-affirmed its majority ruling in the Ungarean case that a loss of use could constitute “direct physical loss or damage” to property. As noted, this issue is set to be decided by the Pennsylvania Supreme Court.

Anyone wishing to review a copy of this non-precedential decision may click this LINK.  The Concurring Opinion by Judge Olson can be found HERE.