NJ Federal Court find virus exclusion applies in BI lawsuit
The judge said the Court cannot deviate from previous rulings without rewriting the insurance policy.
A federal judge in New Jersey has tossed out a COVID-19 business interruption lawsuit filed by an orthodontic office, pointing to the virus exclusion in the company’s insurance policy.
U.S. District Judge Robert Kugler filed his opinion granting defendant Sentinel Insurance Co.’s motion for judgment on pleadings in Cedar Run Orthodontics v. Sentinel Insurance.
DeFelice Orthodontics, located in Hammonton and West Creek, filed the lawsuit in July 2020, seeking coverage for business losses stemming from pandemic-related shutdown orders, Kugler wrote. The plaintiff sought coverage under its policy’s business income and extra expense provisions, as well as a provision titled, ”Limited Fungi, Bacteria or Virus Coverage.”
But the insurance company denied the claim, arguing that the “Virus Coverage” provision “unambiguously precludes recovery” for losses resulting from COVID-19-related closures.
The plaintiff asserted, however, that the provision was ambiguous and therefore must be interpreted in its favor.
Kugler sided with the insurance company, citing two courts in the district that already ruled on the virus exclusion policies issued by Sentinel Insurance Co. in Salon Dare v. Sentinel Ins. and Stern & Eisenberg v. Sentinel Ins. Both cases were dismissed, with the reasoning that the provision precluded COVID-19-related losses, Kugler wrote.
“The Court sees no reason to depart from this overwhelming consensus and override the clear language of the Virus Exclusion,” the judge said. “Sentinel’s Virus Exclusion unambiguously bars Plaintiff’s claim for losses caused by the COVID-19 virus and, as in similar cases, Plaintiff offers no compelling argument that the plain language of the Virus Exclusion is susceptible to two reasonable interpretations.”
The virus exclusion contains an anti-concurrent clause, which precludes coverage for losses resulting from COVID-related civil authority orders, and, as such, the policies do not cover any subsequent claim for loss, Kugler said.
“The Court has great sympathy for Plaintiff and other businesses that have sustained heavy losses during the pandemic. But, as we have previously opined, the Court cannot deviate from this finding without in effect rewriting the policy,” he wrote.
While the New Jersey case hinged on a virus exclusion, the absence of such a policy provision still does not guarantee success for plaintiffs seeking coverage of loss of business during the pandemic.
In the nation’s first COVID-19 business interruption jury trial, a jury decided that Cincinnati Insurance Co., did not have to pay a Kansas City, Missouri, restaurant group for its losses during stay-at-home orders.
This past September, Judge Stephen Bough granted in part and dismissed in part the defendant’s motion for summary judgment.
Bough found that the Eighth Circuit’s ruling in Oral Surgeons barred K.C. Hopps from proceeding on the theory that a government shutdown order constituted a covered “physical loss” or “physical damage” to its restaurant. But the district court also found that ”whether the virus was present on plaintiff’s premises, whether it actually caused a physical loss or physical damage to plaintiff’s premises, and the extent of plaintiff’s damages due to that ’loss’ are genuine issues of material fact which preclude summary judgment.”
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