Chief U.S. District Judge Danny C. Reeves said outdoor sportswear and gear company J&H Lanmark Inc. isn't entitled to coverage from Twin City because the policy's virus exclusion states the insurer will only cover loss or damage by rot, bacteria or virus if the rot, bacteria or virus is the result of a covered loss, like an explosion, windstorm, vandalism or water damage.
The judge rejected J&H's argument that Twin City owes coverage because it didn't specifically exclude pandemics from the policy, saying that fact doesn't negate the agreement in the policy limiting coverage for loss or damage caused by viruses.
"The policy provides that [Twin City] will not pay for loss or damage caused directly or indirectly by a virus 'regardless of any other cause or event that contributes concurrently or in any sequence to the loss,'" Judge Reeves said.
J&H filed suit against Twin City in July in Kentucky state court before it was removed to federal court, according to court records, seeking a declaratory judgment that it was entitled to coverage under the policy and claiming that the insurer breached the contract by not providing coverage.
The suit originally named Kentucky Governor Andy Beshear as a defendant over business closures resulting from his executive orders, but Judge Reeves dropped the governor from the suit in September. The judge said the suit is solely between the store and its insurer.
Twin City filed its motion for judgment on the pleadings in January, according to court records.
In his order Wednesday, Judge Reeves said J&H's loss due to the pandemic was not covered under the policy — despite purchasing the extra "limited fungi, bacteria or virus coverage" endorsement — and granted Twin City's motion.
"Although the court is extremely sympathetic with the plaintiff's position, it cannot ignore the plain, unambiguous language of the policy which excludes coverage," Judge Reeves said. "And the irony is not lost on the undersigned that the outcome of this case would likely have been different if the plaintiff had not purchased the limited virus coverage."
Representatives for the parties did not immediately respond to requests for comment Wednesday.
Judges around the country for the most part have tossed coronavirus-related insurance coverage cases, with many cases reaching the appellate realm.
In February, a Florida federal judge tossed a Miami restaurant's suit, saying the "weight of federal court rulings is against" the restaurant's argument that its inability to operate because of the effects of the coronavirus and government responses constitute physical losses under its insurance policy.
A New York state judge ruled that a Great American Insurance unit doesn't have to cover a movie theater's losses, finding that the direct physical loss or damage language at issue in the policy requires a tangible physical alteration to the policyholder's property, which did not occur.
A Pennsylvania federal judge tossed a shuttered South Carolina restaurant's suit against Pennsylvania National Mutual Insurance Co. for similar reasons.
Then, a California federal judge freed a Chubb insurance unit from covering a San Francisco concert operating company's losses, while a Nevada federal judge tossed a suit brought by a Las Vegas breakfast chain, and an Ohio federal judge threw out a suit brought by a real estate management company.
But two Philadelphia federal judges issued differing opinions on a pair of coverage lawsuits, with one judge ruling that a policy's "virus exclusion" bars coverage and the other deferring the issue to state courts.
Last month, Los Angeles restaurant Plan Check asked the Ninth Circuit to reverse a district court's decision to toss its proposed class action seeking coverage from AmGuard Insurance Co. for losses stemming from COVID-19 shutdown orders.
And a group of minor league baseball teams sought to revive their suit against their three Nationwide insurers, after an Arizona federal judge granted a bid by National Casualty Co., Scottsdale Indemnity Co. and Scottsdale Insurance Co. to dismiss the case.
J&H is represented by Justin S. Peterson and Kellie M. Collins of Golden Law Office PLLC.
Twin City is represented by James M. Burd and Edward M. O'Brien of Wilson Elser Moskowitz Edelman & Dicker LLP.
The case is J&H Lanmark Inc. v. Twin City Fire Insurance Co., case number 5:20-cv-00333, in the U.S. District Court for the Eastern District of Kentucky.
--Additional reporting by Daphne Zhang, Jeff Sistrunk, Matthew Santoni and Mike Curley. Editing by Ellen Johnson.
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