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Virus exclusion holds up in COVID-19 coverage case

dentist office

The virus exclusion in a dentist’s commercial insurance policy with a unit of Nationwide Mutual Insurance Co. bars coverage for coronavirus-related losses, a federal court ruled Wednesday.

The ruling marks another win for insurers battling hundreds of suits filed by businesses nationwide seeking coverage for income lost due to government-ordered lockdowns aimed at containing the spread of COVID-19.

While most of the handful of rulings that have been issued so far focused on whether businesses had suffered a physical loss from the virus, Wednesday’s ruling in the U.S. District Court for the Middle District of Florida in Fort Myers says the virus exclusion in the policy is sufficient to justify the insurer’s claim denial.

In Mauricio Martinez v. Allied Insurance Co. of America, Dr. Martinez filed a claim for lost income and decontamination costs with Columbus, Ohio-based Allied Insurance after he was forced to close his dental practice when Florida declared a state of emergency in March.

The Allied Insurance policy contained an exclusion for loss or damage caused “directly or indirectly” by any “virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease,” court papers say.

While Allied Insurance presented several different arguments in its motion to dismiss, the virus exclusion clearly bars coverage, the court ruled.

“Because Martinez’s damages resulted from COVID-19, which is clearly a virus, neither the Governor’s executive order narrowing dental services to only emergency procedures nor the disinfection of the dental office of the virus is a ‘Covered Cause of Loss’ under the plain language of the policy’s exclusion,” the ruling states.

Dr. Martinez’s attorney was not immediately available for comment.

The decision is the latest in a series of COVID-19 business interruption rulings and legal proceedings that largely have favored insurers. Last week, for example, a federal court in California ruled in favor of Travelers Cos. Inc. in a COVID-19 case, stating that the “impairment to economically valuable use of property” does not amount to physical loss or damage under the terms of the policy.

Policyholders, however, did win a round in their coverage battle with Cincinnati Insurance Co. when a federal judge in Missouri rejected the insurer’s motion to dismiss a suit filed by a group of hair salons and restaurants.

More insurance and risk management news on the coronavirus crisis here