A recent opinion, Urogynecology Specialist of Florida v. Sentinel Insurance Company, LTD., (M.D. Fla. Sept. 24, 2020)
6:20-cv-1174-ORL-22EJK, sheds light on approaches to COVID-19 and the 2020 Shutdown — and the impact to business.
The United States District Court for the Middle District of Florida refused to dismiss a COVID-19 business interruption case filed against Sentinel Insurance Company by a group of medical practitioners. Though a majority of courts throughout the country have ruled against coverage, this is the third federal district court case ruling in favor of the policy holder in connection with business interruption cases. That said, it is important to note that this case dealt with a motion to dismiss as to whether or not the policy holders had stated a claim upon which relief could be granted, which does not necessarily involve a ruling on the merits of the claim.
The Motion to Dismiss Process
In reviewing a motion to dismiss, the court is required to accept as true the factual allegations in the complaint and draw all inferences derived from those facts in the light most favorable to the plaintiff. Also, the complaint must state “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007). And, finally, the facts must be plausible to allow the court to reasonably infer that the defendant is liable for the alleged cause of action. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009) (citing Twombly, 550 U.S. at 556).
So, as expected, the carrier argued that the terms of the policy were unambiguous and excluded coverage for losses caused by viruses including COVID-19. The medical group argued that its all-risk policy language was ambiguous, susceptible to more than one reasonable interpretation and therefore the court should construe the policy in its favor.
Decision from the Middle District of Florida
The court noted that there were “several arguably ambiguous aspects of the Policy makeing determination of coverage inappropriate at this stage.” For instance, the court noted that the Policy that was provided did “not exist as an independent document.”” Urogynecology, slip op. at 6.
It further discussed phrasing by way of example,
…, the ‘Limited Fungi, Bacteria or Virus Coverage’ section of the Policy (Doc. 5-1 at 141) starts by stating that it modifies certain coverage forms. Those forms are not provided in the Policy itself, nor were they provided to the Court. Additionally, the second paragraph states that the virus exclusion “is added to paragraph B.1 Exclusions of the Standard Property Form and the Special Property Coverage Form” which was similarly not provided to the Court. Without the corresponding forms which are modified by the exclusions, this Court will not make a decision on the merits of the plain language of the Policy to determine whether Plaintiff’s losses were covered. Additionally, it is not clear that the plain language of the policy unambiguously and necessarily excludes Plaintiff’s losses. The virus exclusion states that Sentinel will not pay for loss or damage caused directly or indirectly by the presence, growth, proliferation, spread, or any activity of “fungi, wet rot, dry rot, bacteria or virus.” (Id.).
Sentinel, on the other hand, cited cases upholding the exclusions for sexually transmitted viruses, pollution and sewage backups, damage caused by mold and claims from illness or disease. The court disagreed stating that “[d]enying coverage for losses stemming from COVID-19, however, does not logically align with the grouping of the virus exclusion with other pollutants such that the Policy necessarily anticipated and intended to deny coverage for these kinds of business losses.” (Id.)
As a result, noting that there is no binding case law for the court to follow, regarding the issue of the effects of COVID-19 on insurance contract virus exclusions, the court denied the motion to dismiss stating that a plausible claim existed.
We will continue to monitor COVID-19-related litigation and outcomes. Stay tuned.