U.S. District Judge William K. Sessions III on Monday dismissed Associates in Periodontics PLC's entire suit, finding the practice failed to show either the COVID-19 virus or its related government lockdown orders caused any physical loss or damage required for coverage under the policy.
"The critical flaw in plaintiff's position is the lack of physical harm to the property," Judge Sessions said in the order.
The pandemic caused "widespread economic loss due to restrictions on human activities, not the consequence of a direct physical loss or damage to the insured premises," the judge said. It is COVID-19's general presence in the community "not a specific physical harm to covered properties" that caused governments to issue closure orders, he added.
Judge Sessions' decision is the first COVID-19 business interruption decision under Vermont law, according to the University of Pennsylvania Law School's COVID-19 Coverage litigation tracking database.
The South Burlington, Vermont-based dental clinic held an all-risk policy with Cincinnati. After the insurer denied coverage for its pandemic-related loss claims, the practice sued Cincinnati in New Jersey federal court before Cincinnati removed the suit to the Green Mountain state.
The clinic has alleged it suffered financial losses after it suspended business for over two months last year due to the pandemic. The clinic said the airborne virus physically damaged its property after it infected and remained on a surface for up to 28 days. Government orders that required all nonemergency medical procedures to close also prohibited access to its property, the clinic said.
According to court records, the practice relied on one Missouri federal ruling — Studio 417 Inc. v. Cincinnati Insurance Co., which found the presence of the virus caused a "direct physical loss" — to argue its property experienced a loss of use. On Monday, Judge Sessions said the widely cited Missouri case against the same insurer does not apply to the dental practice's claims.
The judge said the "minority" rulings in policyholders' favor, such as in Studio 417 and Blue Springs Dental Care LLC v. Owners Ins. Co., were "outliers."
Judge Sessions also rebuffed the clinic's argument that it's entitled to coverage because it holds an all-risk policy with Cincinnati. "As the Second Circuit has made clear, it has long been recognized that 'all-risk' does not mean all-loss," the judge said.
Counsel for the parties could not be immediately reached for comment Wednesday.
The practice is represented by Adam M. Moskowitz and Howard M. Bushman of The Moskowitz Law Firm PLLC, Gregory A. Weimer of Kirkpatrick & Goldsborough PLLC, John J. Reilly, Lawrence E. Bathgate and Ryan M. Farrell of Bathgate Wegener & Wolf PC and William F. Merlin Jr. of Merlin Law Group.
Cincinnati is represented by Kathleen F. Adams of Litchfield Cavo LLP and Shapleigh Smith Jr. of Dinse.
The case is Associates in Periodontics PLC v. The Cincinnati Insurance Company, case number 2:20-cv-00171, in the U.S. District Court for the District of Vermont.
--Editing by Janice Carter Brown.
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