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Policyholder loses federal appeal of BI ruling


In what may be the first federal appeals court ruling on the issue, the 8th U.S. Circuit Court of Appeals on Friday ruled against an oral surgeon’s practice as to whether a policyholder can recover for COVID-19 losses under its business interruption coverage.

In its ruling in Oral Surgeons, P.C. v. The Cincinnati Insurance Co., a three-judge panel of the St. Louis-based appeals court agreed with the U.S. District Court in Des Moines, Iowa, that the practice’s policy required “physical loss” or “physical damage” to trigger business interruption and extra expense coverage.

“Oral Surgeons did not allege any physical alteration of property,” the ruling said.  “The complaint pleaded generally that Oral Surgeons suspended non-emergency procedures due to the COVID-19 pandemic and the related government-imposed restrictions.

The ruling said Oral Surgeons had alleged no facts showing it had suspended activities due to direct “accidental physical loss or accidental physical damage,” regardless of the precise definitions of the terms “loss” or “damage.”

“We reject Oral Surgeons’ argument that the lost business income and the extra expense it sustained as a result of the suspension of non-emergency procedures was ‘caused by direct “loss” to property,’” the panel said in affirming the lower court’s September ruling.

Cincinnati said in a statement, “We thank the court for its careful consideration of this case and are pleased with its decision affirming that neither the COVID-19 pandemic or the related government-imposed restrictions constitute the direct physical loss or damage required to trigger coverage under our property insurance policy.

“We know that many businesses have been impacted by the COVID-19 pandemic, and we empathize with them. We continue to look for ways to support our policyholders through philanthropic relief as well as helping them proactively manage risks and promptly paying covered claims.”

Plaintiff attorneys did not respond to a request for comment.

Experts have cited this case, believed to be the first at the federal appellate level to involve oral arguments on COVID-19-related business interruption, as among those that will provide clarity to policyholders on the issue.

More insurance and risk management news on the coronavirus crisis here.