Grange Insurance Company faces a proposed class action lawsuit in which a Pennsylvania restaurant and tavern alleges the insurer improperly denied its COVID-19-related property damage claim.
According to the case, the plaintiff purchased from the defendant an “all-risk” property insurance policy purporting to provide coverage for “direct physical loss of or damage to Covered Property . . . caused by or resulting from any Covered Cause of Loss.” The lawsuit stresses that coverage is triggered by “either a physical loss of property or damage to property,” noting that the two concepts are “separate and distinct.”
As the lawsuit tells it, physical loss of or damage to a property can be interpreted to occur when the property is rendered unusable or unsuitable for its intended purpose or “unsafe for normal human occupancy and/or continued use” due to a covered cause of loss. Moreover, the case claims that Grange agreed to pay various business income, extra expense, civil authority, and dependent property coverages under the plaintiff’s policy.
The plaintiff’s Insurance coverage was triggered when the restaurant was forced to limit operations in March 2020 due to executive orders issued by Pennsylvania Governor Tom Wolf in response to the COVID-19 crisis, the lawsuit asserts. The plaintiff claims it has been unable to use its property for its intended purpose—namely, dine-in food and drink services—since March 16 and is scheduled to reopen at 50 percent capacity on June 12.
As such, the plaintiff “has incurred, and continues to incur, among other things, a substantial loss of business income and additional expenses covered under the Policy,” the suit contends.
The plaintiff alleges that although it submitted a timely claim to Grange for business interruption losses, the defendant stated in an April 17 letter that coverage under the policy “may not be afforded” because the restaurant’s losses did not arise from “physical damage to property at the described premises” and were excluded under the policy’s “Virus” exclusion.
The lawsuit argues, however, that the plaintiff did, in fact, suffer “direct physical loss or damage” due to the governor’s closure orders or, alternatively, the “ubiquitous nature of the COVID-19 virus.” Relatedly, the policy’s virus exclusion—which Grange says excludes losses caused by “any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease”—does not preclude coverage given the plaintiff’s losses were caused by government orders, the suit alleges.
Further still, the lawsuit argues that to the extent coverage under the policy must derive from damage caused by the virus itself, the defendant’s enforcement of the virus exclusion should be estopped given regulatory approval of the provision allegedly derived from the insurance industry’s “misrepresentations” to state regulators that the scope of coverage would not change.