The insured dental practice survived a motion to dismiss its business interruption claim arising from closures due to the coronavirus pandemic. Derek Scott Williams PLLC v. Cincinnati Ins Co., 2021 U.S Dist. LEXIS 37096 (N.D. Ill. Feb. 28, 2021).
On March 22, 2020, the Texas governor issued an order postponing all elective surgeries and non-emergency medical dental procedures. The insured dental practice complied with the order and did not resume normal business operations until May 4, 2020. This resulted in a loss of business income.
The insured submitted claims to Cincinnati under business interruption and civil authority provisions of the policy. Cincinnati denied the claim and the insured sued. Cincinnati responded with a motion to dismiss.
Cincinnati argued there was no coverage for business interruption because the insured alleged no facts indicating that its property was physically altered. Cincinnati contended that the term “direct loss” required a physical loss, which it contended meant a physical alteration of the insured’s property.
Although the term loss was defined in the policy to mean either physical loss or physical damage, Cincinnati contended that it required physical damage. This interpretation wrote the term “loss” out of the definition. The court was persuaded that a reasonable fact-finder could find that the term “physical loss” was broad enough to cover a deprivation of the use of business property. Therefore, the insureds business income claims were viable.
The civil authority claims were dismissed, however. The insured had not alleged that “access to the area immediatelysurrounding the damaged proper is prohibited by civil authority.” The insured’s complaint only alleged that it was precluded from conducting elective and non-emergency dental procedures, not form non-elective emergency procedures. Thus, there was no “prohibition” as the policy required.