Back at the beginning of the pandemic, there was a flurry of articles that maybe, just maybe, insurance would cover losses at businesses closed by the pandemic. I was skeptical. Now, as more cases roll in, it looks as if that skepticism was warranted.  In fact, a recent case from my lonely neck of the woods–Western Pennsylvania–continued that trend.

In the case, a tavern and restaurant business sought coverage under a policy of property insurance for lost business income relating to the bar and restaurant shutdown ordered by Pennsylvania Governor Tom Wolf in March 2020.  Specifically, on March 19, 2020, Governor Wolf ordered the closure of all “non-life sustaining” businesses.  Even now, taverns and restaurants in Pennsylvania, while re-opened, are under emergency disaster orders for limited capacity–50% if self-certifying compliance with certain protocols and 25% if not.

The tavern and restaurant argued that policy language requiring “direct physical loss of or damage to” the business included losses caused by governmental orders limiting use of the property, as the occassional court has found. The U.S. District Court, however, rejected that contention, stating that such an interpretation of the policy “would stretch the language beyond the plan meaning of its terms and beyond the interpretive authority of the Court”.  It continued that coverage “unrelated to physical impact” would lead to a “contrived” interpretation of the policy language.

The Court also rejected an argument based on the “physical presence” of the virus at the insured premises.  Again, the Court decided that, even if the coronavirus was present on the premises, the plaintiff could not show it was so “physically ubiquitous as to prevent access to or operations at the property.”  Additionally the Court briefly addressed the the Civil Authority clause, concluding that the Governor’s order did not implicate it due to, again, a lack of physical damage.  Consequently, the Court granted the insurer’s motion to dismiss.

As a–maybe to me only–interesting side note, the judge who decided this case is the same federal judge who concluded that Governor Wolf’s decision to order the closure of “non-life sustaining” businesses was unconstitutional. To me, this shows that even those jurists most sympathetic to the plight of businesses impacted by pandemic closure orders remain likely to enforce insurance contracts strictly.