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Law360 (November 2, 2020, 9:14 PM EST ) A West Virginia federal judge ruled Monday that Cincinnati Insurance Co. does not have to cover an art class company's revenue loss during the pandemic, holding that COVID-19 can be cleaned from surfaces and causes no physical damage.
U.S. District Judge Irene C. Berger said COVID-19 and the government closure orders do not constitute "physical loss or physical damage" as defined under property policies. As such, Cincinnati's policy does not cover policyholder Uncork and Create LLC's economic losses, the judge said.
"Even when present, COVID-19 does not threaten the inanimate structures covered by property insurance policies, and its presence on surfaces can be eliminated with disinfectant," Judge Berger said. "There would be nothing for an insurer to cover."
Uncork, which held art and cooking classes in Barboursville and Charleston, West Virginia, had its Barboursville studio permanently closed in late April. The company had to shut down due to government closure orders in March and said it has suffered significant business loss. Its Charleston studio reopened in June.
After Uncork filed a loss claim, Cincinnati denied coverage in May, asserting there was no physical damage and a pollution exclusion bars coverage. Uncork has contended Cincinnati owes coverage because its policy does not have "a virus exclusion developed by insurers following the SARS pandemic."
The creative events company has also argued West Virginia courts do not require "structural alteration of covered property" to demonstrate "direct physical loss" for coverage.
On Monday, Judge Berger said economic losses do not constitute "property damage or physical injury" to property. Uncork's property was not physically damaged or made unusable by the virus or state-mandated closures, the judge said.
"Recovery for the plaintiff here would be purely economic, solely for lost business without any accompanying repairs to the premises," Judge Berger said.
COVID-19 can be removed from a property's surface by "routine cleaning" done with "greater frequency and care," she added.
"The novel coronavirus has no effect on the physical premises of a business," Judge Berger said in the order. "The pandemic impacts human health and human behavior, not physical structures."
Betsy Ertel, a spokesperson for Cincinnati, told Law360 on Monday that Cincinnati agrees with the court that COVID-19 does not constitute a direct physical loss to property and that the policy does not cover "solely economic losses unaccompanied by physical property damage."
"We join with businesses from across the country in encouraging the federal government to produce the right solution to support our nation's economic recovery," she added.
Counsel for the parties did not immediately respond to requests for comment on Monday.
Uncork is represented by David R. Barney Jr. and Kevin W. Thompson of Thompson Barney and Gary F. Lynch and Kelly K. Iverson of Carlson Lynch.
Cincinnati is represented by Trisha A. Gill and Christopher M. Moreland of Litchfield Cavo.
The case is Uncork and Create LLC v. The Cincinnati Insurance Company et al., case number 2:20-cv-00401, in the U.S. District Court for the Southern District of West Virginia.
-Editing by Janice Carter Brown.
For a reprint of this article, please contact reprints@law360.com.
