Most court rulings for business owners seeking insurance compensation for COVID-19-related losses have been in favor of the insurance companies. However, on Tuesday, a Pennsylvania state court judge ruled in favor of a Pittsburgh tavern that was forced to close during the pandemic.
Judge Christine Ward of the Allegheny County Court of Common Pleas ruled Erie Insurance Exchange needs to cover losses stemming from the loss of use of the property. The tavern was closed when Pennsylvania Governor Tom Wolf ordered the closure of all nonessential businesses.
The judge ruled that the business did not need to suffer physical damage to suffer a direct physical loss or property damage that is covered by the tavern’s business loss policy. This is at least the second time Jude Ward has ruled the pandemic and related business closures constitute a direct, physical loss of use of insured property.
Schmidt Kramer partner Scott Cooper, an attorney for Grant Street Tavern, hopes Erie Insurance Exchange will accept the ruling and “finally pay the coverage that our clients, and others, paid for and need.”
Erie Insurance Exchange spokesperson Matthew Cummings said the company is “disappointed by the decision.” Erie disagrees with the interpretation of insurance contract language, “which is inconsistent with the vast majority of related decisions made throughout the country.”
If Erie chooses to appeal the decision, Cooper hopes for an expedited en banc review from the Pennsylvania Superior Court or King’s Bench from the Pennsylvania Supreme Court.
Cooper is representing other businesses that are looking for business loss coverage like the Grant Street Tavern. In April, he urged an appellate panel to allow similar cases to be coordinated before Judge Ward. Deciding whether business losses due to COVID-19 should be covered “will go a long way towards resolving these cases.”
History of the Case
The lawsuit was filed in September 2020, claiming Erie Insurance Exchange had breached its contract by not providing coverage for business loss. Erie sought a judgment denying coverage while the tavern sought summary judgment granting coverage.
Erie said loss of use of a business due to laws or government ordinances is not covered. Erie claimed these laws and ordinances are no different from other laws that affect how businesses can operate.
The tavern countered that this exemption was only intended to deny coverage for businesses that were unauthorized. The losses suffered by the tavern were because of the pandemic, which is a natural disaster, the tavern argued.
How the Judge Arrived at the Ruling
The judge’s order said the key point of contention in the case was how both sides were interpreting ‘direct physical loss of or damage to’ property. Judge Ward found Erie had improperly took the term “direct physical loss of” to mean the same thing as “direct physical … damage to.”
The judge found the spread of COVID-19 imposed physical losses as well as economic ones, because social distancing measures forced the business to limit use of property and the number of people that could inhabit a building.
The judge found the tavern’s interpretation of the insurance contract to be reasonable. She said summary judgment was granted because there were no genuine issues of material fact about the tavern’s loss of use.
Judge Ward’s order said simply accepting nonbinding decisions of other courts would amount to abdicating the court’s judicial role.
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