Pa. Supreme Court To Take Up COVID-19 Coverage Cases

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Law360 (July 14, 2023, 5:16 PM EDT) — The Pennsylvania Supreme Court will take up appeals that could finally determine whether business losses from pandemic closures should be covered by insurance in the Keystone State.

The appeals, granted Wednesday, stem from two Pittsburgh-area cases with seemingly contradictory 2022 lower appellate court results. In one case, a dentist was told his policy covered his closure, but at the same time, an en banc panel said a tavern wasn’t covered for similar losses. Both had previously been granted coverage by a trial court judge, who found the pandemic caused “loss of or damage to” premises, contrary to many other courts around the country.

In the appeal by MacMiles LLC, Grant Street Tavern is asking the court to determine whether it was entitled to coverage in its case against Erie Insurance Exchange for the loss of use of its property because of COVID-19. The tavern said its business policy was “ambiguous” and “Pennsylvania law mandates that an ambiguity [in the insurance policy] should be construed in favor of the insured.”

In the case in which dentist Timothy Ungarean was afforded coverage for Smile Savers Dentistry PC, CNA and Valley Forge Insurance Co. ask the court to answer a host of questions. Most center on the court’s definition of physical loss or damage.

The insurers want to know if the Pennsylvania Superior Court was correct in deciding Ungarean was entitled to business income, extra expense and civil authority coverage as a result of government closure orders when his business policy covers only “‘direct physical loss.'”

“Neither the relevant government orders nor the COVID-19 pandemic caused a physical alteration to property,” the insurers say. They also want to know whether civil authority coverage is warranted when the same physical damage conditions apply, in addition to a prohibition against accessing the property.

Lastly, the insurers ask whether the trial court was right to conclude that policy exclusions for contamination, consequential loss, fungi, wet and dry rot, microbes, acts or decisions and ordinances “did not bar coverage” for the dentist’s losses.

Though the dentist and the tavern faced different results at the appeals court level, judges concurred in MacMiles. Four judges dissented in the Ungarean case.

COVID-19 coverage cases have been notoriously hard to win for businesses across the country. State supreme courts in Iowa, Maryland, Massachusetts, Ohio, South Carolina, Washington and Wisconsin have previously ruled against policyholders seeking COVID-19 coverage.

This year, Louisiana justices joined pro-insurer decisions by high courts of Connecticut, New Hampshire, Oklahoma and the District of Columbia.

Only the Vermont Supreme Court has sided with a policyholder in reviving a suit for a shipbuilder seeking COVID-19 coverage. A Texas jury stood out in August as the only one to side with a policyholder, handing a multimillion-dollar win to Baylor College of Medicine.

Despite the setbacks, policyholder attorneys are looking forward to decisions from state supreme courts including Nevada, California and New York.

Meanwhile, federal appellate courts have uniformly ruled against policyholders, and federal district courts around the country have permanently tossed about 53% of the 1,446 suits from policyholders against their insurance companies seeking pandemic loss-related coverage, according to Law360’s COVID-19 Insurance Case Tracker. Another 20% of the pandemic insurance suits filed in federal courts have been voluntarily dismissed, the tracker shows, with about 24% yet to be fully decided.

Representatives for the businesses and insurers in the MacMiles and Ungarean cases did not immediately respond to requests for comments Friday.

MacMiles and Ungarean are represented by James C. Haggerty of Haggerty Goldberg Schleifer & Kupersmith PC, by Scott B. Cooper of Schmidt Kramer PC, by John P. Goodrich of Goodrich & Associates PC and by Jonathan Shub of Shub Law Firm LLC.

Erie is represented by Robert T. Horst, Robert M. Runyon III and Matthew B. Malamud of Horst Krekstein & Runyon LLC; by Richard W. DiBella, Tara L. Maczuzak and Jason H. Peck of DiBella Weinheimer; by Frederick P. Santarelli of Elliott Greenleaf PC; by Adam J. Kaiser and Kristin A. Shepard of Alston & Bird LLP; and by William A. Pietragallo of Pietragallo Gordon Alfano Bosick & Raspanti LLP.

CNA and Valley Forge are represented by Robert M. Runyon III of Horst Krekstein & Runyon LLC and by Matthew A. Goldberg, Ilana H. Eisenstein, Timothy P. Pfenninger and Jonathan A. Green of DLA Piper.

The cases are MacMiles LLC v. Erie Insurance Exchange, case number 307 WAL 2022, and Timothy A. Ungarean DMD v. CNA et al., case numbers Nos. 313 & 314 WAL 2022, in the Supreme Court of Pennsylvania.

–Additional Reporting by Ben Zigterman and Hope Patti. Editing by Nick Petruncio.

By Elizabeth Daley