By Shawn Rice

Law360 (March 2, 2021, 10:11 PM EST ) A Georgia dental practice had its lawsuit extracted Monday by a federal judge who found Cincinnati Insurance Co. doesn't have to cover the practice's COVID-19 related losses because there wasn't any direct physical loss or damage tied to its suspension of non-emergency procedures.

In his decision shooting down Gilreath Family & Cosmetic Dentistry Inc.'s suit, U.S. District Judge J.P. Boulee found that a heavily cited Missouri federal case against the same insurer, Studio 417 Inc. v. Cincinnati Insurance Co., doesn't apply to Gilreath's claims.

The court in the Studio 417 case found that COVID-19 damages could be covered by insurance policies' provisions for physical losses in cases where the virus molecules potentially attached to surfaces in a building or on equipment. But there weren't any confirmed cases in Gilreath's office, and the government's decision to stop any non-emergency dental procedures didn't cause any physical damage, Judge Boulee said.

"Contrary to Gilreath's contention, it does not follow that its premises have been or will be physically damaged by the mere existence and proliferation of the COVID-19 virus in the community," he said.

With the ruling, Judge Boulee became the fifth judge in Georgia to dismiss an insured's COVID-19 case, according to a database maintained by the University of Pennsylvania Carey Law School.

Gilreath filed suit in the Northern District of Georgia in May 2020, alleging Cincinnati must cover business interruption losses at its Marietta office. Gilreath argued routine and elective procedures, which were affected by the shutdown orders, were an essential element of its revenue.

But Cincinnati claimed that the shutdown orders didn't bar the insured from its office as Gilreath could offer emergency procedures for patients. There is no Georgia case recognizing the effects of a virus as a direct physical loss to property, the insurer argued, saying there is nothing in the coronavirus itself that forced Gilreath to repair any damaged property in its offices.

Gilreath tried to avoid dismissal by relying on Studio 417, where a Missouri federal judge denied an early attempt by Cincinnati Insurance Co. to end a proposed class action brought by a group of hair salons and restaurants. U.S. District Judge Stephen R. Bough in Studio 417 found the businesses alleged a direct physical loss because they claimed the presence of COVID-19 on their premises hurt their operations.

The Studio 417 case has taken center stage in litigation over insurance for COVID-19 related losses. In a similar case in Missouri, a group of dentists successfully argued that the reduction in services necessitated by the virus was enough to trigger an insurance provision for "physical loss or damage," court records show.

But Judge Boulee had Georgia, not Missouri, law on his mind in Monday's decision, citing a 2003 Georgia Court of Appeals ruling in AFLAC v. Chubb & Sons Inc. that found that claims for direct physical loss necessitate "an actual change ... directly upon the property" that require repairs to be satisfactory for business again.

Because Gilreath hadn't sufficiently shown its premises had any such actual changes, the case couldn't stand, the judge ruled.

Counsel for both sides couldn't be reached for comment late Tuesday.

Cincinnati is represented by Janis H. Spillers of Litchfield Cavo LLP.

Gilreath is represented by Andrew Lampros, Christopher B. Hall and Gordon Van Remmen of Hall & Lampros LLP and Roger W. Orlando of The Orlando Firm PC.

The case is Gilreath Family & Cosmetic Dentistry Inc. v. The Cincinnati Insurance Co. case number 1:20-cv-02248, in the U.S. District Court for the Northern District of Georgia.

--Additional reporting by Jeff Sistrunk and Mike Curley. Editing by Emily Kokoll.

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