U.S. District Judge John R. Padova on Wednesday granted judgment on the pleadings to American Fire and Casualty Co., rejecting policyholder Spring House Tavern's argument that its mere loss of use of its property due to pandemic-related shutdown orders triggered coverage. The judge emphasized that Spring House didn't claim the COVID-19 virus was on its premises.
"The complaint in this case does not allege that any amount of the COVID-19 virus was, itself, present in plaintiff's property, or that some amount of the COVID-19 virus itself made plaintiff's property 'physically unusable,'" the judge said, adding that, even if Spring House had included such allegations, coverage would be foreclosed by a virus exclusion in its policy.
Although the policy covers government closure orders due to food contamination from a "communicable disease," the tavern's complaint never alleged that its food stock was contaminated with any harmful substance.
According to the suit, Spring House of Ambler, Pennsylvania, said it was forced to close business and furlough employees due to the pandemic and government closure orders. The restaurant held a policy with American Fire which provides business income, contamination and civil authority coverage. It sued American Fire after the insurer denied coverage, seeking a declaration that the policy covers its COVID-19-related losses.
The carrier has maintained that Spring House failed to allege property loss or damage, but the tavern has argued that the meaning of "direct physical loss of or damage to property" includes "loss of use" of property, so it does not need to allege physical harm to get coverage.
"Spring House has identified no authority in this Circuit, or decision of the Superior Court or Supreme Court of Pennsylvania, that supports its position," which is "not a reasonable alternative interpretation," Judge Padova said on Wednesday.
Additionally, the judge said, Spring House is not entitled to civil authority coverage because the tavern never alleged it was unable to access its property due to dangerous physical conditions nearby or any surrounding property was damaged by COVID-19 or had another dangerous physical condition.
Representatives for the parties could not immediately be reached for comment on Thursday.
The tavern is represented by James C.Haggerty of Haggerty Goldberg, Schleifer & Kupersmith, P.C.
The insurer is represented by Cari K.Dawson of Alston & Bird LLP, Christopher S.Finazzo and Robert F.Cossolini of Finazzo Cossolini O'Leary Meola &Hager LLC and Matthew Burke of Robins Kaplan LLP.
The case is Spring House Tavern, Inc v. American Fire and Casualty Co., Case Number: 2:20-cv-02872, in the U.S. District Court for the Eastern District of Pennsylvania.
--Editing by Alex Hubbard.
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