There was a time when disputes over insurance issues had no political consequences. Like so many other things, the Covid-19 pandemic has maintained that standard. Now local authorities have sometimes issued orders to close spas and other businesses, reportedly, to prevent the virus from spreading. These companies, in turn, have not been able to fight City Hall, looking to recover their losses from insurers by claiming that they did not believe they refused to pay claims. In Oppers Salon & Health Spa, Inc. v. Travelers Property Casualty Company Of America, Case No. 2: 20-cv-03342-JDW, U.S. District Court of Eastern District of Pennsylvania (November 30, 2020) The USDC was asked to allow Oppers to collect its business insurance losses due to an order from the state to close to avoid the spread of Covid-19.
Among other things, the policy included a company income coverage form that offers Topper coverage in the event of certain interruptions in its operations. Relevant here, that form covers both corporate income coverage and civilian government coverage.
The policy covers loss of business income that Oppers maintains "due to the necessary suspension of your" business "during the" recovery period ", if the suspension was caused by direct physical loss of or damage to property in [the insured’s] premises." The policy defines the recovery period as " period of time after direct physical loss or damage "and" when the premises are to be repaired, rebuilt or replaced at a reasonable speed and similar quality. " Business income includes "net income… plus ongoing normal operating expenses, including salaries." (emphasis added).
The provision on "Civil authority" covers loss of business income and additional costs incurred due to damage to property other than property in the insured's premises, when it is the result of "dangerous physical conditions", a civil authority's actions prohibit access to both the insured's premises and the area immediately surrounding the damaged property. The damaged property must be within one mile of the insured's premises to enable a civil authority to have unrestricted access to the damaged property. microorganism that induces or may induce physical distress, disease or illness. "(" Virus exclusion ").) The virus exclusion applies to" all coverage under all forms and approvals "including business income and civil authority coverage.
The shutdown orders
In March 2020, Pennsylvania, New Jersey and Delaware issued sweeping home orders that states believed would mitigate the further spread of the Covid-19 virus. These shutdown orders referred to the fact that the virus can be transmitted by contact with surfaces and by exposure to airborne particles. As a result of these orders, Toppers had to suspend operations at all its locations. In June 2020, Toppers submitted a coverage claim for its operating costs during the shutdown period. Travelers denied Topper's claims later that month. It explained that Topper's loss did not comply with the rules of the business income or civil authority policy and was also subject to policy virus exclusion, as well as several other exceptions.
Judgment on the pleadings
After the pleadings have been concluded – but early enough not to delay the trial – a party may go for an assessment of the pleadings.
When the policy language is clear and unambiguous, a court applying Pennsylvania law must give effect to that language. When a provision of the policy is ambiguous, a court must interpret the policy in favor of the insured in order to promote the main purpose of the contract with indemnity and against the insurer, as the insurer prepares the policy and checks the coverage. Contract language is ambiguous if it is reasonably receptive to different constructions and can be understood in more than one sentence.
Virus exclusion refers to "loss or damage caused by or as a result of any virus … which induces or may cause physical distress, illness or disease. "The language is not ambiguous and it concerns Covid-19, which is caused by a coronavirus that causes physical illness and distress. The virus exclusion applies to Topper's insurance claims.
The structure of the police indicates that the parties referred to the word "loss" to cover both lost income and continuing expenses. According to the policy, "business income" includes both net income and ongoing expenses, and the policy provides coverage for any "loss of business income."
Even if the virus exclusion did not prevent coverage, Oppers would not be able to show that the policy covers its claim, either under business income or the civil authority's coverage because there was no property The parties agreed to measure the recovery period against the time it takes repairing the premises indicates that they intended the insurance to cover losses for physical damage, and that the intent governs the court's interpretation of the policy because Oppers did not lose use because the premises suffered physical damage.
Civil authority coverage
Oppers did not close due to damage to a nearby premises or because of a dangerous physical condition at another nearby location. It was closed because the shutdown orders were applied to its own operations. The termination of the USDC and the losses resulting from it fall outside the scope of the civil authority's coverage.
Companies across the country have struggled to stay afloat during the pandemic. While the pandemic has affected the salons, the policy's exclusion of viruses is unequivocal and prevents Topper's coverage claims. Toppers also cannot show that Covid-19 or suspension order caused the physical damage or repair loss under the policy. Therefore, Oppers is not entitled to a summary judgment. On the contrary, the USDC concluded that travelers have shown that they are entitled to a judgment on the basis of the pleadings. to prevent the spread of Covid-19 as the insurance policy – as a minimum before the coverage applies – required that there be damage to the insured's property or to property away from the insured's premises which caused the government to restrict access to the insured's property. The virus did not cause any property damage. The insured could not say what was needed to repair their facilities because there was no damage to repair. Finally, the virus exclusion is clear and unambiguous. Although the court stretched the language of the policy to conclude that the virus caused property damage that could be repaired, the exclusion prevented coverage. This and all other similar cases reveal that no insurance covers all possible causes of loss and insurance cannot solve all the problems or losses that an insured is facing.
© 2020 – Barry Zalma
Barry Zalma, Esq., CFE, now limits his practice to serving as an insurance consultant specializing in insurance coverage, insurance claims handling, cheating and insurance fraudsters almost equally for insurers and insurers . He also acts as an arbitrator or mediator for insurance-related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and email@example.com.
Mr. Zalma is the first recipient of the first annual Claims Magazine / ACE Legend Award.
For the past 52 years, Barry Zalma has devoted his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to enable insurers and their claims staff to become insurance claims staff.
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