Thanksgiving is a time to spend with family and friends and celebrate all that we are thankful for. It is also a time for a cornucopia of potential insurance claims. Thanksgiving-related insurance claims can run the gamut from auto accidents, to slip-and-falls, fire losses, and even business losses.
This year, it is estimated that 54.6 million people will travel more than 50 miles for their Thanksgiving celebrations, which greatly increases the risk of an auto accident or other travel-related insurance claim. In addition, the National Fire Protection Association (“NFPA”) has noted that Thanksgiving is the leading day of the year for home cooking fires in the United States.[1] In fact, the NFPA has reported that home cooking fire reports increase over 200% on Thanksgiving Day versus the daily average for the rest of the year.[2]
Increased risks of insurance claims are also not limited to homeowners and/or auto claims and the risks do not end on Thanksgiving Day. Millions of Americans will also venture out on Black Friday to take advantage of the many deals that can be found on the biggest shopping day of the year. This leads to increased exposure for businesses from parking lot accidents, slip-and-falls, miscellaneous property damage, and theft.
The increased number of losses over the Thanksgiving Weekend also results in an uptick in insurance claims under auto policies, homeowners policies, and business insurance policies. This means that insurers need to be ready to staff and handle a potentially large volume of new claims, both first-party and third-party, in the days and weeks surrounding the Thanksgiving Holiday.
With these increased risks in mind, the Lether Law Group Family encourages everyone to use extra caution as you enjoy time with family and friends and/or as you venture out on Black Friday.
If something unexpected should occur or if you need advice for post-Thanksgiving-related insurance claims, please keep in mind that the attorneys at Lether Law Group have over 33 years in combined experience in advising insurers and defending first and third-party claims. This includes providing coverage advice and defending large property losses, catastrophic accident injuries, and other spontaneous and unexpected claims. Please feel free to contact us at any time if you would like to discuss any Thanksgiving-related claims or any other matter.
On October 17, 2022. The United States Court of Appeals for the Ninth Circuit issued additional Opinions regarding COVID-19 Business Interruption claims.
In McCulloch, et al v. Valley Forge Ins. Co., et al¸ No. 21-35520, 2022 U.S. App. LEXIS 2860, 2022 WL 9830777 (9th Cir. Oct. 17, 2022), the Court affirmed a summary judgment ruling from the Western District of Washington dismissing claims by several dentists/dental clinics. The Plaintiffs argued that their claims were improperly dismissed because they asserted the claims resulted from “direct physical loss of or physical damage to” their insured premises. The Ninth Circuit disagreed.
While the appeal was pending, the Washington State Supreme Court issued its ruling in Hill & Stout, PLLC v. Mutual of Enumclaw Ins. Co., 515 P.3d 525 (2022), in which the Supreme Court held that “loss of intended use of property” and “loss of business income” from COVID-19 orders did not qualify for insurance coverage as “direct physical loss of or damage to property.” As a result, the Ninth Circuit dismissed the breach of contract/direct physical loss claim. The Court also dismissed Plaintiff’s claims that they were entitled to coverage under the policies’ civil authority coverage because there was no evidence that the Washington State Governor’s orders were in response to any actual physical property damages. Therefore, the Ninth Circuit concluded that the Hill & Stout Opinion also precludes coverage.
In addition, the Ninth Circuit dismissed the appeal for extra-contractual claims. With respect to the extra-contractual claims, certain Plaintiffs argued that the insurer unreasonably denied their claim and failed to conduct a reasonable investigation of the claims. The Ninth Circuit rejected both arguments. Specifically, the Court noted that the unreasonable denial claim first required a showing of an incorrect denial of the claim. Because the claim was properly denied, the extra-contractual claim failed. The Court rejected the unreasonable investigation argument because “the insurer’s denial of coverage was based on a legal interpretation of the policy. [As a result,] [t]here was no need for factual investigation…”
In Hot Yoga, Inc. v. Philadelphia Indem. Ins. Co.¸No. 21-35806, 2022 U.S. App. LEXIS 28674, 2022 WL 9732180 (9th Cir. 2022), the Ninth Circuit similarly affirmed dismissal of contractual claims based on the Washington State Supreme Court’s Opinion in Hill & Stout. In addition, the Court held that the policy’s virus exclusion, precluding coverage when a virus initiates the causal chain that led to the cause of any claimed loss, barred coverage.
The Ninth Circuit also rejected the insured’s arguments regarding its extra-contractual claims. The insured argued that the district court erred in dismissing extra-contractual claims premised on the insurer allegedly “misrepresenting the pertinent policy language and preemptively denying the claim without any investigation.” The Ninth Circuit held that the claims necessarily failed because the policy did not provide coverage.
As we previously opined, it is clear that the Washington State Supreme Court’s decision and reasoning in Hill & Stout is having a substantial impact on pending COVID-19 BI claims in Washington. We anticipate that there will be several other similar rulings in the near future.
If you have any questions about the above Ninth Circuit cases and how the Hill and Stout case will continue to impact COVID-19 BI claims and cases, please give us a call.
Kevin J. Kay
Shareholder
Kevin is a graduate of Pacific Lutheran University and Seattle University School of Law. He is licensed to practice in the state and federal courts of Washington and admitted to practice before the Ninth Circuit Court of Appeals. In addition, Kevin has appeared pro hac vice in courts in Louisiana and California. Kevin has represented insurers and insureds in coverage for 16 years. These claims involve personal and commercial auto policies, commercial general liability, professional liability, and E&O insurance. Kevin has also advised and represented risk pools, insurers, and insured in matters ranging from automobile/bus accidents to catastrophic landslides. His practice also includes construction defect disputes, personal injury claims, commercial leases, and significant property damage disputes.
As insurance professionals and insurance lawyers are aware, Washington State is historically one of the most liberal jurisdictions in the country. This has often led to decisions and rulings that favor policy holders. However, on August 25, 2022, the Washington State Supreme Court issued a decision finding that COVID-19 related business income losses are not covered under standard commercial property insurance policies. Hill & Stout, PLLC v. Mutual of Enumclaw Insurance Company, Cause No. 100211-4.
Hill & Stout is a Washington dentistry practice. When the COVID-19 pandemic first arose in the State of Washington, Governor Jay Inslee declared a state of emergency and issued multiple proclamations relating to public health and safety, including a proclamation prohibiting all non-emergent dental procedures. In light of the emergence of COVID-19 and the governmental and societal response thereto, Hill & Stout joined thousands of businesses in Washington and around the country in seeking Business Interruption coverage under its commercial property policy.
Mutual of Enumclaw (MOE) denied Hill & Stout’s claim effectively for two reasons. First, the business income loss coverage is triggered only where there is “direct physical loss or damage” to the insured premises. Second, the MOE policy contained an exclusion for any losses caused by a virus. Hill & Stout sued in the King County Superior Court.
Since the inception of the global pandemic, thousands of lawsuits relating to business income loss coverage have been filed by businesses seeking to recover their losses. The courts around the U.S. have been nearly universal in finding that there is no coverage for these claims. In fact, as Lether Law Group has previously reported, the United States District Court for the Western District of Washington has previously ruled in favor of insurers on these claims. Germack v. The Dentists Insurance Company, W.D. Wa. Cause No. 2:20-cv-00661-BJR.
However, until Hill & Stout, the highest court in the State of Washington had not fully and finally resolved the issue in this jurisdiction. In Hill & Stout, the Supreme Court found that there is no coverage for COVID-related business losses because the virus and the governmental proclamations related thereto do not cause direct physical loss or damage to the insured premises. The insured had focused their argument on the claim that they had a “loss” of the business. The Supreme Court rejected that argument finding that the loss was not “physical”.
The Court went on to find that the efficient proximate cause of the business losses was not the governmental response to the virus, but the virus itself. As a result, the Court held that the virus exclusion would operate to preclude coverage, even if there was a direct physical loss.
Lether Law Group represents multiple carriers in Washington and in jurisdictions around the United States in COVID-related business income loss claims. This includes the Germack case referenced above. If you would like to speak with us regarding these or any other claims, please contact us at any time.
Kevin J. Kay
Shareholder
Kevin is a graduate of Pacific Lutheran University and Seattle University School of Law. He is licensed to practice in the state and federal courts of Washington and admitted to practice before the Ninth Circuit Court of Appeals. In addition, Kevin has appeared pro hac vice in courts in Louisiana and California. Kevin has represented insurers and insureds in coverage for 16 years. These claims involve personal and commercial auto policies, commercial general liability, professional liability, and E&O insurance. Kevin has also advised and represented risk pools, insurers, and insured in matters ranging from automobile/bus accidents to catastrophic landslides. His practice also includes construction defect disputes, personal injury claims, commercial leases, and significant property damage disputes.
On May 28, 2021, the United States District Court for the Western District of Washington issued an Order Granting Motions to Dismiss, which given various consolidations effectively dismissed 60+ COVID-19 Business Interruption cases, including in Germack v. The Dentists Insurance Company, Cause No. 2:20-cv-00616.
The Business Income Loss coverage in the policies issued by the multiple defendant insurers provides coverage for loss of business income due to a necessary suspension of operations because of “direct physical loss of or damage to the insured premises,” caused by a “covered cause of loss.” The Court focused its analysis on whether COVID-19 has caused “direct physical loss of or damage to” the insured premises and whether virus exclusions operate to eliminate COVID-19 as a “covered cause of loss.”
Regarding the first issue, the Court engages in a thorough analysis of what it is that constitutes “direct physical loss of or damage to” insured property, paying particular attention to the distinction between the terms “loss” and “damage”. As to the term “damage”, the Court rejected the argument that the average purchaser of insurance would believe that COVID-19 causes damage because it contaminates and therefore alters physical surfaces. The Court ultimately agreed with other Courts throughout the country, holding as follows:
The Court rejects this interpretation of direct physical damage. As numerous courts have recognized, “COVID-19 hurts people, not property,” . . . as “the pandemic impacts human health and human behavior, not physical structures,”. . . The Court concludes that COVID-19 does not cause direct physical damage to property as the term is used in the insurance policies.
Regarding the term “loss”, the Court concluded that when combined with ‘direct’ and ‘physical’, “’loss’ means that the alleged peril must set into motion events which cause inability to physically own or manipulate the property, such as theft or total destruction.” The Court further noted that interpreting the policy to require tangible dispossession is consistent with insurance law doctrine holding that all-risk policies are intended to cover damage to property rather than economic losses.
In regard to the applicability of the Virus exclusions, the Court first rejected the argument that there is somehow a distinction between a “virus” and a “pandemic.” The Court then addressed the Plaintiff Group’s efficient proximate cause argument, finding that under Washington law, the efficient proximate cause of the Business Income losses was not the governmental proclamations, but the virus itself. Finally, the Court rejected a regulatory estoppel argument, finding that it would not recognize a rule that the Washington Supreme Court has not adopted.
Honorable Barbara Rothstein’s Order, which can be accessed here, is amongst the most comprehensive in the nation, and is likely to serve as teaching material in law schools for years to come.
Lether Law Group represents The Dentists Insurance Company in the Germack matter, which was designated as a national class action for dentists impacted by COVID-19.
Lether Law Group is also currently representing several other insurers in COVID-19 business interruption litigation in state, federal, and tribal courts in Washington, Oregon, California, and Pennsylvania amongst others. If you would like to discuss or have any questions about COVID-19 business interruption claims and/or litigation, please feel free to contact our office.
COVID-19 Business Interruption Case Law: The Western District of Washington Denies Plaintiffs’ Motions to Certify Questions to the Washington State Supreme Court
In February of 2021, Plaintiffs in 10 consolidated cases before the United States District Court for the Western District of Washington, including in Germack v. The Dentists Insurance Company, Cause No. 2:20-cv-00616, filed motions to certify questions to the Washington State Supreme Court regarding business interruption coverage for losses arising from the COVID-19 pandemic. The Plaintiffs’ group specifically sought to certify the following questions:
Does being physically deprived of the ability to use covered property directly as a result of the Governor’s shut-down orders constitute a “direct physical loss of” such property?
Does Washington’s efficient proximate cause rule require a factual determination of the predominant cause of an individual business’s loss, before a virus (or other) exclusion may be applied to bar coverage?
On April 23, 2021, Plaintiffs’ motion was denied. The Court began by noting the Plaintiffs’ argument that “the Washington Supreme Court has not yet addressed the question of whether COVID-19 and its resulting business closures and limitations causes ‘direct physical loss’ to an insured property,” and that the Court should defer to the Supreme Court to determine the issue. The Court rejected Plaintiffs’ argument in whole, noting that at least five other federal courts addressing similar issues have considered certification to their respective state supreme courts and found certification to be unnecessary:
This Court has at its command all the tools necessary to reach its decision, including the extensive briefing provided by the numerous parties in the consolidated cases on both questions Plaintiffs seek to certify.
Additionally, the Court found “several other strong federal interests weigh against certification,” including the constitutional provisions for diversity for out-of-state parties, the number of putative class actions filed under the Class Action Fairness Act of 2005, and the unjustifiable delay and expense that would be incurred if certification was allowed. The Court ultimately denied Plaintiffs’ motion for certification, finding that Plaintiffs’ questions “do not present such unique and exceptional issues as to warrant certification.”
Lether Law Group represents The Dentists Insurance Company in the Germack matter, which is designated as a national class action for dentists impacted by COVID-19. TDIC’s Motion for Summary Judgment on the coverage issue is currently pending before the Court as is a Motion for Dismissal of the Class Allegations.
Lether Law Group is also currently representing several other insurers in COVID-19 business interruption litigation in state, federal, and tribal courts in Washington, Oregon, California, and Pennsylvania amongst others. If you would like to discuss or have any questions about COVID-19 business interruption claims and/or litigation, please feel free to contact our office.
The above article is an opinion based on various resources such as industry knowledge and is not to be construed as legal advice or to be used as such. If you require legal advice or would like to inquire further about the information contained in this article, please feel free to contact our office directly.
COVID-19 Litigation Update Lether Law Group represents The Dentists Insurance Company (TDIC) as national coordinating counsel in COVID-19 related business interruption litigation in a number of jurisdictions throughout the United States. We are happy to announce the dismissal of one such action in the Eastern District of Pennsylvania.
In KesslerDental Associates, P.C. v. The Dentists Insurance Company, Cause No. 2:20-cv-03376-JDW, Honorable Joshua D. Wolson granted TDIC’s Motion to Dismiss finding that the COVID-19 pandemic and the governmental and societal response thereto does not trigger the business interruption coverages in the TDIC policy. Summarizing his decision, Judge Wolson stated the following: “The Covid-19 pandemic might be unprecedented, particularly in its impact on businesses large and small. But it is not a writ for the Court to rewrite the Policy to which Kessler Dental and Dentists Insurance agreed. That Policy does not provide coverage for the losses that Kessler Dental has suffered.”
Kessler Dental sued TDIC claiming that TDIC wrongfully denied coverage for business income losses sustained as a result of the pandemic and the State of Pennsylvania’s shutdown orders. The Court, “at the risk of being labeled anti-Dentite”, citing to The Yada Yada Seinfeld episode from 1997, held that the TDIC virus exclusion operates to defeat coverage.
The TDIC virus exclusion precludes coverage for “loss or damage, including economic loss” caused by a virus. The Court found, simply, that the language is not ambiguous and applies to the COVID-related claims. Kessler attempted to overcome the virus exclusion by claiming that the business income losses that it sought were not “loss” or “damage”. The Court rejected this argument based on the plain language of the policy and Pennsylvania’s clear law regarding policy construction and interpretation.
Kessler also argued that the Court should bar TDIC’s reliance on the virus exclusion based upon a regulatory estoppel theory. Kessler argued that ISO and AAIS made false representations to the Pennsylvania Insurance Commissioner in 2006 when proposing the virus exclusion. The Court rejected this argument for two reasons. First, the Court held that Kessler had failed to allege that ISO or AAIS was representing TDIC in making any regulatory representations. Second, the Court held that Kessler had failed to allege any inconsistent statements. “But even if the Court were to attribute those trade groups’ statements to Dentists Insurance, Kessler Dental does not plead any inconsistency. it alleges that ISO and AAIS made statements in 2006 representing that property policies were not intended to cover virus-related losses. Dentists Insurance takes the same position here today as the ISO and AAIS did in 2006; it argues that the Virus Exclusion bars coverage. Thus, regulatory estoppel does not apply, even if, as Kessler Dental claims, the insurance trade groups made statements to regulators in 2006 that were at odds with the then-current state of the law.”
The Court went on to further analyze the specific Business Interruption Coverages – Business Income Loss, Extra Expense, Civil Authority – finding that even in the absence of the virus exclusion, the coverages are not triggered. Importantly, the Court found that the virus and the governmental response thereto did not cause “direct physical loss of or damage to” the insured premises. Notably, the Court found that Kessler was never actually shut down. Pursuant to the governor of Pennsylvania’s business shutdown order, dental practices were not actually closed, but were limited to performing emergency procedures.
Below is a link to the complete Order of the Court.
TDIC was represented by Tom Lether and Eric Neal as national coordinating counsel and was represented locally by Michael Smith and Marc Kamin of the Stewart Smith law firm in Philadelphia.
To the extent that you have any questions about any COVID-19 related matters, please feel free to contact Lether Law Group at any time.
The above article is an opinion based on various resources such as industry knowledge and is not to be construed as legal advice or to be used as such. If you require legal advice or would like to inquire further about the information contained in this article, please feel free to contact our office directly.
