Standard coverage for lost property insurance policies does not apply to loss of restaurant revenue after Governor Larry Hogan ordered restaurants to close in 2020 to stop the spread of COVID-19, the second highest court in Maryland ruled on Tuesday. defeat for Frederick bar.
The pandemic closure - although costly for Anchor Bar and its owner, GPL Enterprise LLC - is not the result of either “direct physical loss” or “property damage” as stated in the restaurant policy agreement with its insurance company, Lloid’s, the Special Appeals Court. held in his published decision of 3-0.
The Court of Appeals stated that Lloyd’s property damage policy is common in the commercial insurance industry and noted that dozens of other state and federal courts have unanimously ruled that the provision does not cover the loss of income associated with the pandemic.
“The main purpose of such a policy is to insure property… from direct physical loss or damage as a result of (for example) fires, earthquakes, tornadoes, ice storms, hailstorms, meteor strikes, theft, vandalism, etc.,” wrote Judge Kevin F. . Arthur for the Special Court of Appeal.
“Unlike a fire or an earthquake, (the governor’s) order had no tangible, physical impact on GPL’s restaurant or restaurant property,” Arthur added. “The physical condition of the insured property was exactly the same day after the governor issued the order as the day before. The GPL lost one use of its property as a result of a legal ban on that use, and not as a result of any actual or tangible damage or intrusion into the property itself. ”
As the decision was announced, the judgment of the Special Court of Appeals applies not only to Anchor Bar but also to other companies covered by a similar commercial insurance policy.
GPL’s lawyer, Brian M. Mol did not immediately return phone and emails on Wednesday asking for comment on the court’s decision and any plans to request a review by the Court of Appeals. Maul is a Frederick solo practitioner.
Craig D. Roswell, Lloyd’s lawyer, declined to comment on the court’s decision. Roswell is with Niles, Barton & Wilmer LLP in Baltimore.
The GPL filed its unfortunate insurance claim on March 30, 2020, two weeks after Hogan issued an emergency order. Hogan did not allow restaurants to continue with a full meal until May 2021.
The insurance policy explicitly covered the “direct physical loss or damage” of Anchor Bar, as well as the loss of business and the occurrence of costs due to the suspension of business caused by loss or damage. The policy also covered lost income or incurred expenses if the civil authority banned access to the restaurant due to damage to neighboring property.
When Lloyd’s dismissed the lawsuit, GPL filed a lawsuit in Frederick County District Court, alleging breach of contract.
The GPL said that the governor’s order was equal to the physical loss due to which Anchor Bar suspended personal operations due to the actions of the civilian authorities. The GPL added that the insurance policy does not include exclusion of coverage for financial losses caused by the virus.
Lloyd’s called for the lawsuit to be dismissed, saying the policy did not apply because Anchor Bar did not suffer direct physical loss or damage.
The district court agreed and approved the dismissal after the hearing on April 27, 2021.
Confirming the dismissal, the Special Court of Appeals said that the language of politics was “unambiguous” and that it must be given “simple, ordinary and usual meaning”.
The GPL is not “alleged facts sufficient to establish that the COVID-19 virus in some way physically altered the structure of the restaurant to trigger policy coverage,” Arthur wrote.
“No repair, reconstruction or replacement and no relocation could lead to a return to a personal dinner at the GPL restaurant while the governor’s order was in force,” Arthur added. “Since the GPL had nothing to repair, renew, replace or relocate, it follows that the GPL did not suffer any direct physical loss or damage to property.”
The Court of Appeals also considered that the absence of exclusion for virus-related losses in the policy “does not imply the existence of coverage” for the immediate closure of COVID-19.
“Instead, we determine whether the policy provides coverage by looking at what the insurer has agreed to insure,” Arthur wrote. “According to the policy in question in this case, the insurers agreed to insure themselves against ‘physical loss or damage’ of the insured’s property.
Arthur was joined in the opinion by Judges Catherine Grill Gref and James R. Euler, a retired lawyer sitting on a special assignment.
year, the Special Court of Appeals made a decision GPL Enterprise LLC v. Certain insurers at Lloid’s et al.No. 302, September 2021.