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A Pennsylvania state court refused Tuesday to dismiss a COVID-19 business interruption lawsuit filed by a gym against its insurer, stating the business had sufficiently alleged a “direct physical loss or damage” to its property.
Brown’s Gym Inc. in Clarks Summit, Pennsylvania, filed suit against Cincinnati Insurance Co., which had issued it an all-risk policy that did not include a virus exclusion, in the Court of Common Pleas of Lackawanna County in Scranton, Pennsylvania, according to the ruling in Brown’s Gym Inc. v. The Cincinnati Insurance Co. and C.C. Young and Henkelman Insurance.
Cincinnati had denied Brown’s COVID-19 business interruption coverage claims on the basis it had not sustained a direct physical loss or damage.
The court disagreed. While the policy does not include a virus exclusion, it does contain a “communicable disease or virus” exclusion for other “crisis event response communication expense coverage,” it said.
This created “a reasonable expectation on the part of the gym that coronavirus-related damages would be covered by the policy’s business interruption coverage, but excluded from the crisis event response communication expense coverage,” it said, in refusing to dismiss the gym’s breach of contract and bad faith claims.
“Furthermore, inasmuch as the gym has averred that the COVID-19 virus was also present on nearby properties and that public access to the covered premises was completely prohibited as a result, it has stated an alternate claim for ‘business income’ and ‘extra expense’ recovery under its ‘civil authority coverage,’” the ruling said.
Cincinnati declined to comment on the case.
Plaintiff attorneys did not respond to a request for comment.
Earlier this month, Fireman’s Fund Insurance Co. sued The Walt Disney Co. over the extent of COVID-19 business interruption claims the insurer must pay the entertainment giant.
More insurance and risk management news on the coronavirus crisis here.