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A Pennsylvania state appeals court has overturned a lower court and ruled against a Pittsburgh tavern in a COVID-19 business interruption case.
MacMiles LLC, which operates the Grant Street Tavern, sued Erie, Pennsylvania-based Erie Insurance Exchange in state court in Pittsburgh after it denied coverage for claims for the loss of use of its physical premises because of the COVID-19 pandemic and the governor’s orders, according to Wednesday’s ruling by the Pennsylvania Superior Court in Harrisburg in MacMiles LLC d/b/a/ Grant Street Tavern v. Erie Insurance Exchange.
In May 2021, the trial court granted the tavern summary judgment, finding coverage under the business income protection portion of the policy and a triable issue of fact under the coverage’s civil authority provision.
The dispute arises under the policy’s statement that it will pay “for direct physical ‘loss’ of or damage to Covered property,” the appeals court said.
The trial court reasoned that “the disjunctive ‘or’ between ‘direct or physical loss of’ and ‘damage to Covered Property’ supports a reasonable reading of the Policy whereby a ‘direct physical loss’ need not necessarily result from physical or structural damage,” the ruling said.
The appeals court disagreed. The policy covers only physical damage, it said, not “purely economic loss.”
“The trial court’s reading of the policy is strained,” it said. “Further, MacMiles has failed to allege any physical damage,” it said, in directing the trial court to enter an order granting judgment on the pleadings in Erie's favor on this issue.
The appeals court also ruled the trial court erred in finding there was a triable issue of fact on the issue of whether there is civil authority coverage for COVID losses under the policy.
The same day, the appeals court upheld the Pittsburgh court’s ruling in favor of a dental office that sued CNA Financial Corp. for COVID-19-related business interruption coverage.
A concurring opinion in the MacMiles case, in pointing out that a different opinion was reached by the appeals court in the similar CNA case, said “these cases, in which the Court must address coverage issues, are fact intensive matters which require, in each case, a review of the individual policy.
“We must base our decision solely on the policy’s language…our review of MacMiles’s claims is restricted to the ‘specific terms employed’ in Erie’s policy.”
John P. Goodrich, of Goodrich & Associates P.C. in Pittsburgh, who was a plaintiff attorney in both cases, said, “We’re looking forward to these both going up to the (Pennsylvania) Supreme Court, and hopefully, the Supreme Court will embrace the decision in Ungarean” because of its ambiguity. Erie’s attorney did not respond to a request for comment.