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COVID-19 Litigation Update

by | Dec 7, 2020 | COVID-19, Insurance Law, Misc.

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.

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.

COVID-19 Litigation Update

by | Oct 1, 2020 | COVID-19, Insurance Law, News & Updates

As we have recently reported, the clear trend in the United States Courts is towards finding that the typical Business Interruption (BI) coverages in U.S. commercial property policies will not be triggered by the COVID-19 pandemic.  Thus far, the majority of the decisions on this coverage issue have gone in favor of the insurance industry.Interestingly, on Tuesday, September 15, 2020, the High Court of Justice for the Business and Property Courts in Great Britain issued a ruling in a “test case” relating to 370,000 British BI claims.  In a lengthy opinion authored by Lord Justice Flaux (pictured below in the traditional attire of the Queen’s Bench), the High Court found that the policy forms at issue extended BI coverage for losses related to the COVID-19 pandemic.

Fortunately, this ruling from across the pond is unlikely to have much impact on the ongoing litigation of this dispute in the U.S.  That is because the policy forms that the industry presented to the High Court in the “test case” included a coverage for losses related to the spread of infectious disease.  Lord Flaux found that most – though not all – of the policy forms would provide coverage.  Because it was a “test case” there was not any specific finding of coverage for any individual insured.  Rather, the decision provides the manner in which insureds should present their claims depending on the forms or combination of forms in each policy.

Perhaps the most interesting aspect of this ruling is the contrast in how the U.S. and U.K. markets reacted to the early 2010’s SARS outbreak.  In the more risk-averse U.S. market, the industry response to SARS was to quickly adopt virus exclusions.  In the handful of rulings on COVID-19-related BI coverage that we have seen to date, it appears that the courts in the U.S. will enforce that exclusion.

In the U.K., the market responded to SARS by offering infectious disease coverage.  The insurers offering that coverage have obviously had a decade to collect the premiums that go with it.  However, according to the ruling of the High Court, it appears that those insurers will now be required to pay the claims of a broad cross-section of British businesses.  Only time will tell which market had the better strategy for dealing with coverage issues associated with the current global pandemic.

As always, if you would like to discuss the issues in this newsletter or any other matter, 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.