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Third Circuit rules against dozens of policyholders in covid disputes



In a sweeping consolidated ruling issued Friday, the 3rd U.S. Circuit Court of Appeals in Philadelphia ruled in favor of several insurers, ruling that dozens of companies were not entitled to Covid-19-related business interruption losses.

It joined 10 other federal appeals courts in ruling for policyholders on the issue, with only the U.S. Court of Appeals for the District of Columbia Circuit not ruling.

Plaintiff in the case, Rhonda H. Wilson; Law Offices of Rhonda Hill Wilson PC v. USI Insurance Service LLC; Hartford Casualty Insurance Co.are businesses in Delaware, Maryland, New Jersey, New York and Pennsylvania in the food service, medical, health and wellness, arts, music and legal sectors.

The 3rd Circuit affirmed lower district courts ruling that policyholders were not entitled to business interruption insurance coverage because there was no physical injury.

Its language echoed that in earlier decisions by federal appeals courts.

“To establish coverage under the business income and incidental expenses provisions, the companies must demonstrate that their operations were interrupted due to ̵

6;direct physical loss of or damage to’ the properties,” it said.

“The companies argue that the loss of their ability to use their properties for their intended business purposes constitutes ‘physical loss of’ the properties. We disagree.”

The court said the plaintiffs’ argument was “completely divorced from the physical condition of the premises” and that they lost their use due to government orders, with the structures of the properties remaining “intact and functional”.

Plaintiffs have had relatively little success even in state supreme courts. State Supreme Courts in Delaware, Iowa, Maryland, Massachusetts, Ohio, Oklahoma, South Carolina, Washington and Wisconsin have also ruled in favor of insurers in comparable cases, with only Vermont’s Supreme Court ruling in favor of policyholders so far.


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