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Law360 (May 25, 2021, 6:28 PM EDT ) A Massachusetts insurer does not have to reimburse an Arizona crystal and rock shop for costs associated with closing under state orders tied to the COVID-19 pandemic because the policy didn't cover losses from a virus, a federal judge said Tuesday.
U.S. District Judge Denise J. Casper handed Boston-based Ohio Security Insurance Co. a win in the COVID-19 business coverage suit filed last May by Accents of Sterling Inc., which operates the Rare Earth Gallery in Scottsdale, Arizona, and was seeking payment for "property damage, business income loss and other expenses" under its policy.
The shop had argued in its lawsuit that contamination from the virus and the loss of use of the store during the shutdown of nonessential businesses ordered by Arizona Gov. Doug Ducey qualified for reimbursement as property damage under the policy's provisions about business income, extra expense and civil authority.
But Judge Casper said Accents being closed didn't amount to incurring "direct physical loss or damage" as required by a fair reading of the policy.
Further, the court noted that the policy's exclusion for losses related directly or indirectly from a virus bars Accents' claims, and the importance of the governor's orders being a proximate cause is of little importance.
"The mere fact that these orders, rather than the virus itself, directly resulted in Accents being unable to access or use the property does not invalidate the exclusion or make it any less clear," Judge Casper said.
Accents filed suit in May 2020, initially naming Liberty Mutual Insurance Group as a defendant. The company filed an amended complaint adding Ohio Security Insurance as a defendant and later voluntarily dismissed Liberty Mutual.
In January, Ohio Security asked the court to judge the case on the pleadings, arguing Accents "cannot write out of the policy the virus exclusion, which is at the root of plaintiff's claims."
Accent said the insurer's interpretation of the policy was flawed and asked the court to allow discovery to flesh out the scope and determine the validity of the virus exclusion.
Representatives for the parties were not immediately available for comment on Tuesday.
Accents of Sterling is represented by Arnold Levin, Laurence Berman, Frederick Longer and Daniel Levin of Levin Sedran & Berman LLP, Anthony Tarricone and Michael Lurie of Kreindler & Kreindler LLP, Richard M. Golomb and Kenneth J. Grunfeld of Golomb & Honik PC, Aaron Rihn of Robert Peirce & Associates and W. Daniel "Dee" Miles III, Rachel N. Boyd and Paul W. Evans of Beasley Allen Crow Methvin Portis & Miles PC.
Ohio Security is represented by Matthew M. Burke and Pamela E. Berman of Robins Kaplan LLP.
The case is Accents of Sterling Inc. d/b/a Rare Earth Gallery v. Ohio Security Insurance Co., case number 1:20-cv-11005, in the U.S. District Court for the District of Massachusetts.
--Editing by Janice Carter Brown.
For a reprint of this article, please contact reprints@law360.com.
