On Wednesday, the Pennsylvania Superior Court ruled on two appeals of coverage disputes over business losses suffered during the COVID-19 pandemic.
The court ruled that a dental practice in Pittsburgh should receive coverage from its business interruption insurance. The court also overturned a lower court ruling that Erie Insurance Exchange should provide coverage to the owner of a bar because the owner lost use of his property.
The dental practice case was brought by Dr. Timothy Ungarean against Valley Forge Insurance Company and CNA. An en banc majority affirmed the lower court’s ruling that Ungarean suffered direct physical losses because of COVID-19 and the resulting government shutdown order. This ruling also applies a proposed class of business that suffered physical losses.
The other case was brought by MacMiles LLC against Erie Insurance Exchange over the loss of use of Grant Street Tavern.
Schmidt Kramer partner Scott Cooper was one of the attorneys representing MacMiles LLC and Dr. Ungarean.
How the Judges Reached Their Decisions
The majority opinion in the Ungarean case was authored by Judge Jack A. Panella. He said the lower court was correct in its interpretation of the phrase “direct physical loss of or damage to property.” The lower court said this phrase can refer to the loss of use of property even if the property did not suffer physical harm.
Panella conceded that this conclusion goes against many other cases in which courts found that business were not entitled to coverage for losses suffered because of the COVID-19 pandemic. The judge said his ruling was made based on the language of Ungarean’s policy. He also said ambiguities in policies should favor the insured and the analysis of the trial court.
The opinion in the MacMiles case was authored by Judge Victor P. Stabile. He said business loss policies do not provide coverage for the loss of use of commercial property when that loss of use is not accompanied by physical damage that makes the property unusable.
James C. Haggerty, one of the attorneys representing the businesses said the majority opinion in the Ungarean case is the proper interpretation of state law. He said the majority opinion in the MacMiles case relies on decisions made in other jurisdictions, and these decisions should not have a bearing on resolving these business loss cases.