The Pennsylvania trial court granted summary judgment on the dentist’s business interruption claim due to closure caused by COVID-19. Ungarean v. CNA, 2021 Pa. Dist. & Cnty. Dec. LEXIS 2 (Pa. D.& C. March 22, 2021).
The governor issued mandates restricting the operations of certain types of businesses in Pennsylvania due to the onslaught of the pandemic in March and April 2020. Plaintiff had to shut down the majority of its business operations. Plaintiff submitted a claim for coverage for business interruption, civil authority and other coverages under its policy with CNA. The claim was denied and plaintiff filed suit. Cross-motions for summary judgment were filed.
The court noted that to establish coverage for business interruption, the insured must show it suffered “direct physical loss of or damage to” its property. CNA contended that this required some physical altercation of or demonstrable harm to plaintiff’s property. Plaintiff contended that the “direct physical loss of . . . property” was not limited to physical altercation of or damage to plaintiff’s property but included the loss of use of the property.
The court found that CNA improperly conflated “direct physical loss of ” with “direct physical damage to” and ignored that the two phrases were separated by the disjunctive “or.” With the word “or,” the phrase “direct physical loss of “meant something different than “direct physical . . . damage.” Here, plaintiff’s loss of use was both “direct” and “physical.” The spread of COVID-19 and social distancing measures caused plaintiff to physically limit the use of property and the number of people that could inhabit physical buildings at any given time. Any economic losses were secondary to the businesses’ physical losses. At the very least, it was reasonable to interpret the phrase “direct physical loss of . . . property” to encompass the loss of use of plaintiff’s property due to the spread of COVID-19 absent any actual damage to property. Plaintiff reasonably established the right to coverage under the business income and extra expense provisions of the policy.
Plaintiff was also entitled to civil authority coverage. Even absent any damage to property, the spread of COVID-19 resulted in a serious public health crises, which directly and physically caused the loss of use of property. The court was not persuaded by CNA’s argument that, in order to be entitled civil authority coverage, the action of civil authority had to be a complete and total prohibition of all access to plaintiff’s property by any person for any reason. Instead, the policy merely required that “an action of civil authority . . .prohibits access to” plaintiff’s property.
Finally, none of the exclusions promoted by CNA negated coverage. For example, the exclusion for contamination barred coverage for loss or damage caused by “contamination other than pollutants.” The policy did not define “contamination.” Based on dictionary definitions, the exclusion only applied when something external came into contact with an object, i.e., property. Here, given the primary means by which COVID-19 spread, the cause for the loss of use of property was not the contamination of property. Rather the cause of loss was the loss of use of property was the risk of person-to-person transmission of COVID-19, which necessitated social distancing measures and fundamentally changed how businesses utilized physical space (property).
Accordingly, plaintiff’s motion for summary judgment was granted and CNA’s motion was denied.