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Law360 (March 12, 2021, 3:44 PM EST ) A Georgia federal judge ruled that a daycare center cannot get insurance coverage for its pandemic-related revenue loss, ruling that the center failed to show COVID-19 caused any property damage or that the virus ever entered its facility.
U.S. District Judge Clay D. Land tossed Lemontree Academy's suit against Utica Mutual Insurance Co. and Republic Franklin Insurance Co. Thursday, following a string of Peach State rulings holding that the virus did not cause the policyholder to suffer any "direct physical loss of or damage to" property, a precondition for coverage.
"There is no plausible allegation that the COVID-19 virus seeped into any of the structures and caused any physical damage to them, which then made it unsafe to inhabit the facility," the judge said.
Lemontree alleged "the possible exposure of its facility to the virus caused physical damage" but it could not demonstrate that the coronavirus alone would physically damage or alter any part of its facility, he added.
With the ruling, Judge Land became the sixth judge in Georgia to dismiss an insured's COVID-19 case, according to a database maintained by the University of Pennsylvania Carey Law School.
Lemontree operates daycare programs, summer camps, and pre-K programs in Morgan County, Georgia. The childcare center shut down due to state-mandated closures last March and suffered a substantial revenue loss, according to the suit.
According to court records, the daycare operator has argued that damage caused by COVID-19 on its property is no different from fire or water damage because the pandemic made its property unsafe and unusable.
Judge Land disagreed on Thursday, saying that Lemontree never alleged COVID-19 was ever present on its property, not to mention whether or not the coronavirus can cause direct physical loss or damage to its property.
Under Georgia law, "physical loss or damage" means "an actual change in insured property," the judge said. "Even if Lemontree could eventually prove that COVID-19 was present in its facility, the mere presence of the COVID-19 virus would not constitute the direct physical damage necessary to trigger coverage," he added.
Additionally, the policy's civil authority provision is not triggered because the government closure order "did not physically affect Lemontree's facility in any manner," the judge said. "It may have prevented Lemon Tree from using it, but that is not physical damage as contemplated by the policy."
Courts around the country have issued more than 250 decisions on insurers' motions seeking dismissal or partial summary judgment in over 1500 COVID-19 business interruption coverage suits filed so far. Around 80% of judges sided with insurers and tossed policyholders' suits, according to the UPenn data.
Representatives for the parties could not be immediately reached for comment on Friday.
Lemontree is represented by Harold L. Johnson of The Law Office of Harold L. Johnson LLC.
The insurers are represented by Matthew G. Moffett and Cody Michael McCollum of Gray Rust St. Amand Moffett & Brieske LLP.
The case is Lemontree Academy LLC v. Utica Mutual Insurance Co., case number 3:20-cv-00126, in the U.S. District Court for the Middle District of Georgia.
--Editing by Ellen Johnson.
For a reprint of this article, please contact reprints@law360.com.
