Superior Court Affirms Trial Court's Finding that No Coverage Existed Related to a COVID-19 Shutdown of a Business

In a non-precedential decision issued by the Pennsylvania Superior Court in the case of The Scranton Club v. Tuscarora Wayne Mut. Group, No. 238 MDA 2021 (Pa. Super. Jan. 27, 2025 Panella, P.J., Olson, J., and Kunselman, J.) (Op. by Kunselman, J.), the Superior Court affirmed the trial court’s dismissal of all claims filed by The Scranton Club and found that no coverage existed to the COVID shut down of the Plaintiff’s business.  

The affirmed trial court Opinion was written by Judge Terrence R. Nealon of the Lackwanna County Court of Common Pleas.  The Tort Talk Blog post on Judge Nealon's Opinion, which contains a link to that decision can be found at this LINK.

In this case, the Superior Court followed the precedent set forth in the recent Pennsylvania Supreme Court decision on similar issues in the case of Ungarean v. CNA & Valley Forge Ins. Co., 323 A.3d 593 (Pa. 2024).

The Superior Court in this case found that the trial court properly ruled that The Scranton Club did not allege any facts to establish that it incurred a “direct physical loss of or damage to property” as required to establish coverage under the policy. The court noted that, given that there was nothing that required restoration of The Scranton Club’s property as a result of the COVID shut down, there is no coverage to be provided under the insurance policy at issue.

The Superior Court noted that it also continued to affirm the trial court’s decision to dismiss the Plaintiff’s claims for civil authority coverage. The court noted that, to assert a claim for the civil authority coverage under the policy at issue, the civil authority action prohibiting access to the premises must have been in response to “damage” caused to another property. Given that there is no evidence of any damage to any neighboring properties which resulted in the Plaintiff’s property being shut down, the Superior Court held that the trial court was correct to deny coverage on this ground as well.

Lastly, the Superior Court noted that it was now affirming the trial court’s dismissal of the claim for bad faith given that coverage was not otherwise available under the policy at issue.


Anyone wishing to review a copy of this decision may click this LINK.

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.

Business Interruption Coverage Claim Denied Relative to a Restaurant

In the case of KWB Enter. Inc., v. Nationwide Gen. Ins. Co., 2:20-CV-05195-MSG (E.D. Pa. Jan. 31, 2022 Goldberg, J.), the court granted a Defendant insurance company’s Motion to Dismiss a restaurant’s claims for alleged losses allegedly arising from COVID-19 closure, as well as the alleged public perception of restaurants as dangerous due to COVID-19.

In so ruling, the Court found that the Plaintiff’s “business income,” claim failed because the Plaintiff’s claims were inconsistent with the modifiers “direct,” “physical,” and “of Covered Property” as listed in the insurance policy.

The court additionally found that the Plaintiff’s “civil authority” and “reasonable expectation” arguments failed to support any finding of coverage as well.

Anyone wishing to review a copy of this decision may click this LINK.  The Order can be viewed HERE

Source: “Digest of Recent Opinions.” Pennsylvania Law Weekly (Feb. 24, 2022).

Link to Compilation of COVID-19 Business Interruption Coverage Cases Nationwide

 

The University of Pennsylvania School of Law has been tracking COVID-19 Business Interruption Coverage cases on a nationwide basis. That compilation can be found at this Link:  

https://cclt.law.upenn.edu/.

COVID-19 Business Interruption Coverage Claims by Medical Practice Dismissed by Pennsylvania Federal Court

In the case of Delaware Mgmt., LLC v. Continental Cas. Co., No. 2:20-CV-4309 (E.D. Pa. Nov. 11, 2021 Goldberg, J.), the court ruled that the insureds were not entitled to business interruption coverage for economic losses allegedly sustained due to COVID-19 Executive Orders where the coverage under the policy was only triggered by physical damage or loss of covered property. The court found that the Plaintiff had not pled any such damages or losses.

According to the Opinion, the Plaintiffs before the court owned and operated a group of thirteen (13) affiliated medical practices.

The court noted that the Plaintiffs’ facilities remained opened during the duration of the Executive Orders, although the operations of the business were limited. The court rejected the Plaintiffs’ interpretation of “loss” to include a partial loss of use of their facilities.

The court also rejected the Plaintiffs’ argument that the public fear of indoor establishments due to COVID-19 caused a “physical loss of or damage to” the property in order to trigger coverage. Rather, the court held that the physical loss of damage language in the policy required a tangible physical alteration of the property itself.

The court additionally ruled that the civil authority endorsement did not provide the Plaintiff with coverage as the endorsement required that the civil action be taken in response to any physical loss or physical damage. Because the Plaintiff had not alleged any such loss or damage to their property or to any nearby properties the court ruled that the Plaintiff could not rely upon the civil authority endorsement in this case.

Also, in footnote 1 of the Opinion, the court notably indicated that the University of Pennsylvania School of Law has been tracking these cases on a nationwide basis. That compilation can be found at this Link:  https://cclt.law.upenn.edu/.

Anyone wishing to review a copy of this decision may click this LINK.  The Court's companion Order can be viewed HERE.


Source: “Digest of Recent Opinions.” Pennsylvania Law Weekly (Dec. 3, 2021).

Another Victory for Carrier in Another Covid-19 Business Interruption Coverage Dispute

In the case of Warrick v. Aspen Am. Ins. Co., No. 2:21-CV-00250-WSS (W.D. Pa. Oct. 15, 2021 Stickman, J.), the court granted a Defendant’s Motion to Dismiss a Plaintiff’s claim for business interruption coverage based upon alleged COVID-19 losses.   

According to the Opinion, Warrick is a dentistry business.   During the COVID pandemic, the business had a policy with the Defendant insurance company, which included coverage for loss business income under covered circumstances.   

The court found that the governmental mitigation orders under the COVID-19 pandemic did not prohibit access to the Plaintiff’s premises and the Plaintiff’s alleged losses did not stem from direct physical damage to its property.  The court also found that there was no coverage under the business income, extra expenses, or civil authority provisions of the policy. 

Anyone wishing to review a copy of this decision may click this LINK.

Source: “Digest of Recent Opinions.”  Pennsylvania Law Weekly (Nov. 20, 2021). 

Source of image: Photo by Karolina Grabowska from Pexels.com.

COVID-19 Business Interruption Coverage Claim Dismissed

In the case of Penn Asian Senior Serv. v. Selective Ins. Co.,  No. 20-4919 (E.D. Pa. Sept. 30, 2021 Pratter, J.), the court granted an insurance company’s Motion to Dismiss a Plaintiff’s business interruption coverage action under its property insurance policy relative to the COVID-19 pandemic closures.

According to the Opinion, the Plaintiff filed a declaratory judgment action seeking coverage under its property insurance policy for operating expenses incurred while its adult daycare center was closed due to COVID-19 orders.

The court found that the Plaintiff did not show any evidence of a physical loss of the premises.

The court additionally stated that the civil authority provision did not apply under the circumstances presented.

The virus exclusion in the policy was also found to preclude coverage.

As such, the court granted the carrier’s Motion to Dismiss.

Anyone wishing to review a copy of this decision may click this LINK.


Source: “Digest of Recent Opinions.” Pennsylvania Law Weekly (Oct. 21, 2021).

Another Covid-19 Related Claim for Business Interruption Coverage Dismissed

In the case of Star Buick v. Sentry Ins., No. 5:20-CV-03023 (E.D. Pa. May 26, 2021 Leeson, J.), the court entered a declaratory judgment for the carrier after finding that the insurance policy providing coverage for direct physical loss, which phrase was not defined in the policy, did not provide coverage for loss of business income to an auto dealership due to the suspension of business operations during the COVID-19 pandemic.

The court additionally found that the civil authority provision in all-risks policy did not provide coverage to the auto dealership given that the business was not denied access to the property as a result of damage sustained to another property.

Anyone wishing to review a copy of this decision may click this LINK.  The companion Order can be viewed HERE.


Source: “Court Summaries” by Timothy L. Clawges, Pennsylvania Bar News (June 28, 2021).

Source of image:  Photo by Kaique Rocha from Pexels.com

Carrier's Denial of Claim for Business Interruption Coverage Upheld

In the case Isaac’s At Spring Ridge, LLP v. MMG Ins. Co., No. CI-20-03613 (C.P. Lanc. Co. March 2, 2021 Sponaugle, J.), the court issued an Order granting the carrier’s Motion for Judgment on the Pleadings in a coverage action arising out of the Plaintiff’s claim of business income losses under an all-risk commercial property policy involving a restaurant that was forced to modify, but not close, its operation due to the Commonwealth’s COVID-19 Orders.

In so ruling, the court relied, in part, upon a virus exclusion contained in the policy.

The court also found that the civil authority coverage requirements under the policy were not met.

The court also noted that the Plaintiff did not suffer any direct physical loss or damage to its premises in order to meet the requirements of another policy provider for coverage.

Anyone wishing to review this detailed Order without Opinion issued by the Court may click this LINK.


I send thanks to Attorney Peter J. Speaker of the Harrisburg, PA office of the law firm of Thomas, Thomas & Hafer, LLP for bringing this case to my attention.

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.

Anyone wishing to review a copy of this decision may click this LINK.


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