Addressing a dismissal bid by Hartford Casualty Insurance Co., U.S. District Judge William M. Ray repeatedly voiced doubt to plaintiff's counsel about establishing damages, and whether alleged income losses could be tied to the shutdown itself rather than to decisions made by the firm and its clients to avoid health risks.
Speaking via Zoom, Judge Ray also said he was concerned about whether the bankruptcy outfit, Karmel Davis and Associates Attorneys-At-Law LLC, would have to use "junk science" to try to show the virus had been present in, and thus physically damaged, its office.
After Karmel Davis' attorney, Yechiel Twersky, said it had pled that the virus had been "likely and plausibly" present in the firm's building, Judge Ray said that sounded like a "guesstimate" that might not be borne out if the case reaches discovery and expert opinions.
"That sounds like junk science to me, that an expert is going to be able to say, based on a certain infection rate in the area of Douglasville, that it was more likely than not the virus was inside the office," the judge said.
In the early months of the pandemic, namesake attorney Karmel Davis sued Hartford over denied coverage under an "all risk" property policy. The firm has argued that the virus constituted physical damage that forced it, along with a state shutdown order in April, to vastly curtail its business and lose income.
In a September amended complaint, Davis also accused the insurer of trying to "retroactively" write a policy that did not, unlike some policies at issue in other COVID-19 coverage cases, include an exemption for coverage on losses from a virus or pandemic. The proposed class action seeks to represent other businesses that have seen income coverage denied under a property insurance policy without a virus exclusion.
In its motion to dismiss, Hartford said the policy's language requires a "direct physical loss of or physical damage" to a businesses' facility or "dependent" property — in this case, the federal bankruptcy court in Atlanta — neither of which occurred at the firm.
During the 50-minute Zoom hearing, Twersky said that the shutdown order had effectively banned clients from visiting a business where COVID-19 was "likely" present, and that bankruptcy filings required "live" signatures that hadn't been possible.
Even if Davis may have dealt with clients by phone, "generally she lost business because she couldn't meet with people in her office," he said.
Hartford counsel Sarah D. Gordon emphasized to the court that there was "nothing physically wrong" with the Karmel Davis office, which remained usable and accessible, even if reasonable health concerns and a stay-at-home order focused on slowing the spread of the novel coronavirus had prevented the business or its clients from using it.
"Mere loss of use does not suffice" under the terms of the policy, she said.
Moreover, a "crush" of legal authority from state and federal judges who have looked at the issue of COVID-19 losses and policies focused on physical property have determined that the policies don't apply, she said.
"When something can be readily cleaned away, it doesn't cause direct physical loss or damage to property," Gordon said.
Judge Ray said he expected to rule on the Hartford motion to dismiss in the coming weeks.
Karmel Davis and Associates Attorneys-At-Law LLC is represented by Rachel Soffin, Greg Frederic Coleman, Jonathan Betten Cohen, Alex R. Straus, and William A. Ladnier of Greg Coleman Law PC, Yechiel M. Twersky, John G. Albanese and Shanon J. Carson of Berger Montague, Daniel K. Bryson of Whitfield Bryson & Mason LLP, Thomas Lee Maddox, and David James Worley of Evangelista Worley LLC.
Hartford is represented by Anthony J. Anscombe and Sarah D. Gordon of Steptoe & Johnson LLP, Joshua B. Belinfante and Joseph Harris Saul of Robbins Ross Alloy Belinfante Littlefield LLC, Ryan M. Chabot and Alan E. Schoenfeld of WilmerHale, and Christopher C. Frost, John A. Little Jr., and Caleb C. Wolanek of Maynard Cooper & Gale PC.
The case is Karmel Davis and Associates et al. v. Hartford Financial Services Group, case number 1:20-cv-02181, in the U.S. District Court for the Northern District of Georgia.
--Additional reporting by Daphne Zhang. Editing by Michael Watanabe.
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