Sandy Point Dental said the district court wrongly interpreted the phrase "direct physical loss or damage," a coverage requisite, to conclude that COVID-19 and the effect of government closure orders did not constitute property damage. The practice brought its appeal to the Seventh Circuit this month.
"The word physical should be understood expansively, and that COVID-19 therefore did physical damage to the property as that term is to be understood in case law," Sandy Point said.
The practice said it was forced to shut down due to the government's effort to curb COVID-19, a physical condition covered under its policy that does not contain a virus or pandemic exclusion. It urged the appellate court to read its insurance policy broadly and consider its "reasonable expectation."
"The State of Illinois recognizes that insurance contracts are not negotiated the way many other contracts are negotiated," Sandy Point said.
In September, U.S. District Judge Robert W. Gettleman freed Cincinnati from having to pay for the office's loss, holding that the dental office did not demonstrate any "physical alteration or structural degradation" of its property. The judge said the office failed to show that the virus was present on its property.
The lower court has held that Cincinnati's policy "unambiguously" stated that "demonstrable, physical alteration to the property" is required to trigger coverage, but the dental office failed to show that. The clinic never needed to carry out repairs and change any part of the building to keep the business operational, the judge said at the time.
In the brief, Sandy Point said the airborne virus physically attached to its property and has deprived it of the intended function of its facilities. The insurance policy covers loss of use of a property, the practice contended.
"Plaintiff was forced to close down because otherwise, there would be an infiltration of a deadly virus — not that there was an actual infiltration," it said. "It is possible and even likely … that customers, employees, and other visitors to the insured property were infected with the coronavirus due to their physical contact with the premises."
Sandy Point, which was forced to pause most of its business in March 2020, sued Cincinnati in April 2020 over its refusal to pay out on its policy. The dental clinic said in August that it should not be forced to show the novel coronavirus was present on its properties because the civil authority's shutdown orders prevented virus infiltration.
The office contended that only emergency dental procedures were considered essential by the government orders, and 95% of the clinic's work is routine or elective dental procedures, so the orders effectively shut the clinic down.
Representatives for the parties could not be immediately reached for comment.
Sandy Point Dental is represented by Jonathan Lubin of Charles Aaron Silverman PC.
Counsel information for Cincinnati was not immediately available.
The case is Sandy Point Dental PC v. The Cincinnati Insurance Co. et al., case number 21-1186, in the U.S. Court of Appeals for the Seventh Circuit.
--Editing by Orlando Lorenzo.
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