Judge Decides Clarks Summit Gymnasium Lawsuit Against Insurer May Continue | Business



A Clarks Summit gymnasium’s lawsuit against its insurance company for failing to cover its losses from COVID-19 will continue in Lackawanna County Court. Justice Terrence R. Nealon rejected the Cincinnati Insurance Co.’s offer to dismiss Brown’s Gym’s complaint in a long ruling this week, finding that the lack of a virus exclusion in its policy created a reasonable expectation that damages related to the coronavirus are covered.

Brown’s, 1000 S. State St., says it suffered substantial losses and incurred additional expenses after the state ordered it and other non-essential businesses to shut down on March 19, 2020, at the start of the pandemic.

The gym sued Cincinnati Insurance and its co-defendant CC Young and Henkelman Insurance in August after the companies allegedly failed to cover losses under its business policy.

Seeking to dismiss the case, Cincinnati Insurance said Brown’s did not allege “direct physical loss or damage” to its property, which it said is a necessary condition of the coverages at issue.

However, in dismissing the insurer’s preliminary objections at trial, Nealon rejected this argument.

Prior to the COVID-19 pandemic, appeals and state courts held in insurance coverage cases “where sources imperceptible to the naked eye” significantly reduce the use of a property, l The “direct physical loss or damage” requirement is met if the invisible contaminant or pathogen renders the property useless or uninhabitable or destroys its functionality, Nealon said.

Based on Brown’s claim that the “continued presence” of COVID-19 made its property unsafe and unfit for its intended use, the gym “sufficiently alleged” direct physical loss or damage ” … Insurance coverage against business interruption, ”concluded the judge.

The Gymnasium policy does not include a specific virus exclusion among the 26 declared exclusions of business interruption insurance, although it does contain a complete “communicable disease or virus” exclusion for other coverages ” crisis event response communication costs, ”said Nealon

This created “a reasonable expectation from the gymnasium that coronavirus-related damage would be covered by police business interruption coverage, but excluded from coverage for communications expenses in the event of a crisis,” he said. -he declares.

Focusing on the issue of “direct physical loss or damage” and the lack of virus exclusion, Nealon addressed the two key issues in the case, said lawyer John M. Mulcahey of Munley Law, Scranton , which represents Brown.

Attempts to contact attorneys Lawrence M. Silverman or Daniel G. Litchfield of Litchfield Cavo, the Philadelphia law firm that represents Cincinnati Insurance, have failed.



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