The courts universally favor policyholders in coverage disputes with insurance companies. After all, insurance companies are big, they hire lawyers and write the policies that control coverage. Recognizing the benefits of power, courts across the United States are placing a heavy weight on the scales in favor of policyholders. If there is even a “plausible” argument that police language can be interpreted in two ways, the insured wins.
Yet courts also recognize that when the language of a policy is “unambiguous,” they will apply the law regardless of the outcome – even during a global pandemic. And that is exactly what is happening in the COVID-19 coverage lawsuits that have hit U.S. courts almost as hard as the pandemic itself.
The last example is Gilreath Family & Cosmetic Dentistry, Inc. v. Cincinnati Insurance Company, ___ Fed. NS. ___, 2021 WL 3870697 (11e Cir. August 31, 2021). In the second decision of a federal appeals court in a COVID-19 coverage case, the Eleventh Circuit made short work of the insured’s coverage arguments.1
Gilreath Family & Cosmetic Dentistry is a dental practice located in Marietta, Georgia. As a result of their governor’s refuge-in-place order, Gilreath suspended all services except essential services and thus lost “a substantial portion of its usual income”.
Gilreath filed a class action lawsuit against its insurer, arguing that it was entitled to business interruption coverage under the “business income”, “additional expenses” and “civil authority” provisions of its general policy. commercial responsibility. The district court dismissed her complaint and Gilreath appealed.
Affirming the District Court, the Eleventh Circuit noted that coverage under each of these sections is not unlimited; it requires a demonstration of “accidental physical loss or accidental physical damage” in order to recover. Citing Georgia state law, the court noted that “accidental physical loss” is interpreted to mean that there must be “an actual change in the insured property” which renders the property “unsatisfactory for future use.” Or demands “that repairs be made.” ”
The court observed that despite the pandemic, “Gilreath was still using the property to perform emergency procedures” and did not cite “any damage or change in the property … which required its repair or prevented its future use for dental procedures “. Gilreath’s argument that its confined space was conducive to the “persistence” of viral particles also did not sway the court. “Even so, we don’t see how the presence of these particles would cause physical damage or loss to property.”
The court’s rejection of the confined space argument is significant. In new COVID-19 coverage lawsuits, plaintiffs attempt to leverage the most recent “science” on the subject, arguing that viral material alters the molecular structure of surfaces; that the “logarithmic” analysis “proves” that an increased rate of infection places the viral load within an insured establishment; and that the insured premises are rendered “uninhabitable” by the virus – even though they are open to the public today despite the push caused by the Delta variant.
More importantly, the Eleventh Circuit reaffirmed that the physical aspect remains the key to triggering business income coverage. To this day, the courts remain committed to the idea that insurers do not cover economic losses unless they are caused by losses. physical loss or damage. A government order that requires the suspension of operations does not work “a real change in insured property.” Nor does an “algorithm” replace “physical damage”. As the Eleventh Circuit noted, while the language of an insurance policy is unambiguous, “the policy applies” as written, whether it benefits the carrier or the insured. ” , “Physical” always means physical.
Here is the takeaway. Insurers have prevailed in the overwhelming majority of federal trial court decisions to date, primarily on the basis of long-established state law requiring physical damage to a structure as a predicate for outage coverage. activity. Now, insurers have a 2-0 record in federal courts of appeal. The future will tell if the business continues to fail in favor of insurers. Notably, it remains to be seen whether state supreme courts will interpret their own law in the same way as federal courts that currently apply it.
1 The first federal appeal victory has arrived Oral surgeons, PC c. Cincinnati Insurance Company, 2 F.4e 1141 (8e Cir, July 2, 2021).