The Washington Supreme Court became the fifth state supreme court to rule in favor of insurers Thursday in COVID-related business interruption lawsuits, when it ruled unanimously against a dental practice.
But a California appeals court on Thursday overturned a lower court ruling and ruled that a nail salon was entitled to business interruption coverage under its Lloyd’s policy.
The Washington case, which affirmed a lower court decision, was brought by a dental practice with offices in Oak Harbor and Anacortes, Washington v. Enumclaw, Mutual of Enumclaw Insurance Co. based in Washington according to the decision in Hill and Stout PLLC v. Mutual of Enumclaw Insurance Co .
As with comparable rulings, the Olympia-based supreme court stated that there was no direct physical loss as required by its coverage. “It is unreasonable to read ‘direct physical loss of …property’ into a property insurance policy to include the constructive loss of the property’s intended use,” the ruling said.
The dental ordinance “has yet to prevail.” PHYSICAL use the property in question.” He was in possession of the practice and “still functional and able to be used, and HS was not prevented from entering the property,” he said.
The decision also held that the coverage was excluded from the coverage’s virus exclusion.
The ruling follows similar rulings by state supreme courts in South Carolina, Wisconsin, Iowa and Massachusetts.
Plaintiff’s attorney Mark A. Wilner, a partner with Gordon Tilden Thomas & Cordell LLP in Seattle, said in a statement, “We were obviously disappointed to see the decision. But we appreciate that our state’s highest court has been able to quickly and decisively resolved this important issue of state insurance law—especially when so many federal courts were issuing decisions that second-guessed 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 closely tailored to the facts before it. The decision would not apply to cases with materially different facts, such as the virus-on-the-premises cases, many of which do not even include virus exceptions.”
Lawyers for the insurers did not respond to a request for comment.
The decision of the state appeals court based in Los Angeles in Butter Nails and Waxing Inc. v. Underwriters at Lloyd’s, London, which focused on a 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 insured property.
While the case law governing insurance contracts and COVID-19 is relatively new, it is already “widely established that the temporary loss of use of property due to pandemic-related closing orders does not amount to physical loss or damage.” , said the decision.
“This ‘broadly established’ rule, however, has developed in the context of insureds seeking coverage under provisions of policies requiring loss or damage to property.
“Here, plaintiff is not seeking coverage under any part of the policy requiring any loss or damage to property,” but under a Civil Authority endorsement which “with very little explanation or qualification” says it will pay for loss caused by business interruption. due to “Civil Authority Action” requiring evacuation.
The decision also held that the policyholder was entitled to coverage under his policy’s Mold Exclusion, which, he said, does not “clearly exclude losses arising from public health orders addressing a viral pandemic, particularly when the insured does not claim the virus was present on the business premises.”
Butter Nails attorney Robert S. Gerstein of the Law Office of Robert S. Gerstein in Santa Monica, Calif., said evacuation coverage in a nail salon policy is unusual. “I don’t think there’s been another case across the country that involves this evacuation language,” he said.
However, this is not the case with the mold exception, “which was essentially similar to the coverage language in other cases, which has almost universally been found” to apply to pandemic-related cases where there was a loss of business because of government orders. “This was a very reasoned decision” to the contrary, he said.
Lloyd’s attorneys did not respond to a request for comment.