In COVID-coverage first, 8th Circuit sides with insurer
REUTERS/Andrew Kelly
(Reuters) - In the first federal appellate ruling on business interruption insurance coverage for COVID-19 related losses, the 8th U.S. Circuit Court of Appeals on Friday affirmed that Cincinnati Insurance Co’s all-risk policy to Oral Surgeons PC (OSPC) did not cover loss of use from mandatory closures.
“The policy here clearly requires direct ‘physical loss’ or ‘physical damage’ to trigger business interruption and extra expense coverage,” the 8th Circuit held. “Accordingly, there must be some physicality to the loss or damage of property — e.g., a physical alteration, physical contamination, or physical destruction.”
OSPC, represented by Peddicord & Wharton, filed suit for declaratory judgment, breach of contract and bad faith in July 2020, alleging that four of its locations had been closed to all but emergency services for six weeks due to the Iowa governor’s pandemic-related shutdown order.
The district court dismissed the action in September, agreeing with Cincinnati’s lawyers at Litchfield & Cavo that OSPC had not alleged any “property damage” that would trigger coverage.
OSPC’s appeal drew amicus support from the Restaurant Law Association, represented by Jenner & Block, while the National Association of Mutual Insurance Companies and the American Property Casualty Insurance Association filed a joint amicus brief supporting the insurer. They were represented by Robinson & Cole, Zelle, and Crowell & Moring.
The 8th Circuit heard argument in April, becoming the first appellate court to do so in a COVID coverage case. The 3rd Circuit heard two cases later in April but has not yet decided them. The 7th and 9th Circuits have arguments scheduled later this year.
According to the Covid Coverage Litigation Tracker at the University of Pennsylvania Carey Law School, 167 federal appeals remain pending, with 57 in the 9th Circuit alone. At least 27 are pending in state appellate courts, according to the tracker.
The case decided Friday is Oral Surgeons P.C. v. Cincinnati Insurance Co, 8th U.S. Circuit Court of Appeals, No. 20-3211.
For OSPC: Tyler Smith and Randy Wilharber of Peddicord & Wharton
For Cincinnati Insurance Co: Daniel Litchfield of Litchfield & Cavo