In another victory for policyholders, a Pennsylvania judge denied an insurer's early attempts to avoid coverage for losses due to the COVID-19 pandemic. Although the judge did not explain his reasoning, the denial is positive news for policyholders who dispute whether COVID-19 causes "physical harm or loss" and whether so-called "virus" exceptions limit or cover coverage for pandemic-related losses.  Taps & Bourbon at Terrace LLC, a restaurant and bar in Philadelphia, sought coverage for lost revenue and additional costs incurred as a result of the pandemic. Their insurer Lloyd & # 39 ;s, London insurers, denied coverage because Taps & Bourbon failed to claim "direct physical loss or damage" and because the policy contained an exception that the insurer claimed to apply to the alleged loss. The restaurant then filed a lawsuit for breach of contract and bad faith.
Lloyd & # 39 ;s argued that all claims should be rejected and that the refusal to cover was correct because the claim was not covered by the policy.
no "direct physical loss or damage" required to trigger coverage and even if there was physical loss or damage, the virus exclusion policy applies. The virus exclusion states that the insurer will not cover "loss or damage caused by or caused by any virus."
Taps & Bourbon replied that "direct physical loss or injury" was clear. In support, the restaurant in the third circle cited precedents that define "physical loss" as a loss that is the result "immediately and immediately from an event." The complaint stated that the premises were closed immediately and that all business activities ceased as a result of the civil authority's orders issued in response to COVID-1
Taps & Bourbon questioned why the policy would even include a virus ban if a virus could not cause physical loss. In addition, the restaurant argued that virus exclusion should not apply in any case because it is ambiguous and was removed from the policy by an approval that deleted all exceptions unless otherwise specifically excluded. Virus exclusion was not among those excluded from the exclusion.
In their respective proposals, the two parties also questioned the applicability of the approval of the civil authority and the approval of the food contaminant. Lloyd & # 39 ;s argued that the civil authority's provision did not apply because the restaurant did not identify "property damage" and access to the premises was not prohibited, two requirements that Lloyds claimed were necessary to create coverage. Lloyd & # 39 ;s also claimed that the provision on food contamination is not applicable because no food poisoning was alleged. The court gave no substantive insight or reasoning for its denial of Lloyd's proposal. However, the Court noted that the arguments raised factual issues that could not be resolved on a preliminary proposal. The decision therefore proposes that courts will refrain from making quick decisions on COVID-19 business interruptions due to the wording alone, especially where the insurers' insurance language is unclear or receptive to give different results based on the specific facts of the problem. Nevertheless, the decision is a step in the right direction for policyholders seeking coverage under countless variations of business interruption insurance for the catastrophic financial losses due to the COVID-19 pandemic. Policyholders should be reminded to look closely at their policy formulation and not assume that a decision based on different policy languages may in any way dictate the availability of coverage under another, different formulation.