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The Washington Supreme Court on Thursday became the fifth state supreme court to rule in favor of insurers in COVID-related business interruption litigation when it ruled unanimously against a dental practice.
But on Thursday, a California appeals court overturned a lower court ruling and held that a nail salon was entitled to business interruption coverage under its Lloyd’s policy.
The Washington case, which upheld a lower court ruling, was brought by a dental practice with offices in Oak Harbor and Anacortes, Wash., against Mutual of Enumclaw Insurance Co., headquartered in Enumclaw, Wash., according to the ruling in Hill and Stout PLLC v. Mutual of Enumclaw Insurance Co.
As with comparable sentences, the Olympia-based supreme court held that there was no direct physical loss, as its coverage requires. “It is unreasonable to read ‘direct physical loss of … property’ in a property insurance policy to include constructive loss of the property’s intended use,” the ruling said.
The dental office “could still physically use the property in question. It was in the practice’s possession and “was still functional and usable, and HS was not prevented from entering the property,” he said.
The ruling also held that coverage was precluded by the exclusion of the virus from coverage.
The decision follows similar rulings by state supreme courts in South Carolina, Wisconsin, Iowa and Massachusetts.
Plaintiff attorney Mark A. Wilner, a partner at Gordon Tilden Thomas & Cordell LLP in Seattle, said in a statement: “Obviously we were disappointed to see the ruling. But we appreciate that our state superior court was able to intervene quickly and decisively on this important issue of state insurance law, especially when so many federal courts were making decisions guessing what the state supreme court would do.
“Now they don’t have to. Also, it is important to remember what the court decided and what it did not decide. The court’s decision was strictly tailored to the facts before it. The decision would not apply to cases with materially different facts, such as virus cases at facilities, many of which do not even involve virus exclusions.”
Lawyers for the insurers did not respond to a request for comment.
The ruling of the Los Angeles-based state appeals court in Butter Nails and Waxing Inc. c. Underwriters at Lloyd’s, London, which focused on the Los Angeles nail salon property policy, cited a provision in its coverage that insured against business interruption due to “civil authority action” requiring the evacuation of the insured property.
While the case law governing insurance contracts and COVID-19 is relatively new, it is “well established that temporary loss of use of property due to pandemic-related closure orders alone does not constitute loss or damage. physical,” the ruling said.
“This ‘widely established’ rule, however, has developed in the context of policyholders seeking coverage under policy provisions requiring property loss or damage.
“Here, the plaintiff does not seek coverage under any part of the policy that requires any type of loss or damage to property”, but rather under an endorsement from the civil authority that “with very little explanation or qualification” says that it will pay for the loss. caused by business interruption. by “Civil Authority Action” requiring evacuation.
The ruling also held that the policyholder was entitled to coverage under his policy’s Mold Exclusion, which, it said, clearly does not “exclude losses arising from public health orders addressing a viral pandemic, particularly where the insured does not allege that the virus was present in the business premises.”
Butter Nails attorney Robert S. Gerstein of the Law Office of Robert S. Gerstein in Santa Monica, Calif., said coverage of evacuation in the salon’s policy is unusual. “I don’t think there’s been another case across the country involving this evacuation language,” he said.
However, that is not the case with the mold exclusion, “which was basically similar to coverage language in other cases, which has almost universally been found” to apply, to pandemic-related cases where there has been a loss of business because of government orders. “This was a very well reasoned ruling” to the contrary, he said.
Lloyd’s attorneys did not respond to a request for comment.