Court dismisses 32 COVID-19 insurance cases against Erie Insurance

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A federal judge has dismissed 32 lawsuits brought by 47 plaintiffs over COVID-19 business interruption insurance claims against Erie Insurance, finding the plaintiffs had not ‘plausibly argued’ that they were entitled to coverage under their Erie policies.

U.S. District Judge Mark R. Hornak’s ruling in Western Pennsylvania reflects views of other courts that have dismissed claims that COVID-19 viruses and government shutdowns cause direct physical harm and loss that would trigger coverage against business interruptions. The opinion also reflects the analysis the same judge gave in dismissing similar claims against other insurers, including Cincinnati Insurance, Travelers Insurance and Haryord Financial Services.

Plaintiffs in this multidistrict litigation included retail stores, restaurants, car dealerships, hair salons and dental offices located in the District of Columbia, Illinois, Maryland, New York, Ohio, Pennsylvania , Tennessee, Virginia and West Virginia. Each plaintiff had an “all risk” commercial property insurance policy with Erie, which was either the Ultrapack Plus policy or the UltraFlex policy.

While their businesses may be different, their legal claims were similar to those asserted by business owners in a slew of similar cases nationwide. The Erie cases were consolidated under Judge Hornak in January 2021.

Both Erie policies cover direct physical loss or damage to covered property resulting from an insured peril. Both policies contain a “law or ordinance” exclusion. The UltraFlex policy also contains a virus exclusion.

After Erie denied their claims, the plaintiffs filed lawsuits alleging that Erie wrongfully denied them coverage under the income protection, extra expense, civil authority, dependent property and/or provisions. or lawsuits and labor coverage. They asserted two covered causes of direct physical loss or harm: COVID-19 itself and mandatory shutdown rules issued by governments to mitigate the spread of the virus.

The main dispute between the parties, as in many other cases, was whether these events caused “direct physical loss or damage to” covered property.

Erie argued that “the direct physical loss or damage to ‘property’ unambiguously requires tangible and concrete physical damage” to the property, which “cannot be plausibly alleged” by the plaintiffs.

The district court reviewed the laws and decisions of the plaintiffs’ various states where similar cases have been decided, noting that while no high court in those states has yet ruled, other state courts have done so and the “near-uniform dismissal of claims as plaintiffs”” applying the law of the jurisdictions involved in this MDL presents a “path of ascending precedent” for plaintiffs. Hornak said the central question is whether these rulings — from Virginia’s highest court and the law enforcement courts of the other eight jurisdictions involved in this MDL — were “correct predictions of how the highest court in the jurisdiction concerned would rule on the claims” which mirror those of the plaintiffs. .

The court said there was “no persuasive basis” to conclude that these cases had not been properly decided and were not reliable indicators of the course the Federal Court should take.

The court rejected plaintiffs’ claims that virus particles can attach to and remain stable on surfaces for hours or from one to 14 days, and thereby “modify” surfaces. “[T]The natural and plausible inference from these claims is that virus particles dissipate on their own, after these numbers of hours or days have passed, without any human intervention. Based on these claims, the impact that COVID-19 virus particles have on the property on which they are present is quite different from the impact that, for example, a fire that burns all or part of a structure has on the property where a fire occurred,” the notice states.

The court also rejected the argument that the lack of a virus exclusion in some policies means that coverage should be provided under those policies.

The court also rejected the argument that Pennsylvania’s reasonable expectations doctrine in insurance law entitles an insured to coverage based on the insured’s reasonable expectations even though the terms of the insurance contract clearly exclude and unambiguously the cover.

The court concluded: [I]It is evident that the COVID-19 pandemic has had adverse consequences on people around the world that cannot be overstated. However, it may also be correct that the Erie policies to which the plaintiffs in this MDL were party do not cover the additional consequences that the plaintiffs claim to have suffered as property and business owners as a result of the pandemic and the orders. associated governments. limit how the properties could be used.

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