Sixth Circuit Finds No Coverage For Suspected COVID-19 Losses | Carlton Fields
Much like the tidal wave of trial court rulings in favor of insurers in COVID-19 business interruption insurance lawsuits, a similar wave of appeal rulings is emerging. form. In Dakota Girls LLC v. Philadelphia Indemnity Insurance Co., the Sixth Circuit Court of Appeals, applying Ohio law, upheld the dismissal of a lawsuit brought by private preschools seeking coverage for loss of business interruption related to COVID-19. The Sixth Circuit ruled that there was no coverage under the policy coverage provisions for buildings and personal property, business disruptions and civil authorities – provisions which have been frequently discussed in litigation. related to COVID-19 insurance coverage. The Sixth Circuit also ruled that there was no coverage under the communicable disease coverage provision of the policies – a type of coverage provision that has been seen relatively less frequently in COVID insurance coverage disputes. -19.
With the decision of the Sixth Circuit in Dakota Girls, there have now been at least 17 appeal rulings in favor of insurers in COVID-19 insurance coverage cases in a range of jurisdictions, including the United States’ courts of appeal for the sixth, seventh , Eighth, Ninth, and Eleventh Circuits as well as California and Ohio State Courts of Appeals.
The alleged losses of kindergartens
Involved in Dakota Girls was an order from the Ohio government that would have required the closure of all child care programs for two months from March 2020 to combat the spread of COVID-19. Complainant nursery schools in Dakota Girls alleged that this order forced their kindergartens to close temporarily and that they suffered financial losses as a result. Preschools also alleged that people with symptoms “compatible with” COVID-19 had been present in preschools.
Coverage for buildings and personal property, business disruptions and civil authorities
Preschools have requested coverage under the coverage provisions of the policies for buildings and personal property, business interruption and civil authorities. Each of these provisions required direct physical loss or property damage for coverage to exist. Citing its earlier ruling in the COVID-19 insurance coverage case of Santo’s Italian Cafe c. Acuity Insurance Co., 15 F.4th 398 (6th Cir. 2021), the Sixth Circuit held that there was no cover under any of these three provisions because “mere economic damage and loss of use resulting of a closing order ”do not constitute direct physical harm. loss or damage to property.
Communicable disease coverage
Preschools have also requested coverage under the communicable disease coverage provision of the policies. This provision provided coverage for “losses resulting from the cessation of business operations by the government” as a direct result of an outbreak of a communicable disease or a waterborne pathogen that causes actual disease in the premises described. . The Sixth Circuit explained that for this disposition to be triggered, two conditions had to be met. First, there had to be a “real illness” of COVID-19 in the nursery schools covered. Second, the government order was to be issued in response to this particular incident of illness.
The Sixth Circuit ruled that the preschools had not plausibly claimed either of the prongs and therefore there was no coverage. Regarding the first part, the sixth circuit noted that the preschools conceded that they had no confirmation that a COVID-positive person had indeed been present in one of the preschools. Instead, the preschools had simply alleged that “[e]each school had people with symptoms on its premises consistent with COVID-19[FEMININE”Lesixièmecircuitajugéqu’ilétaitinsuffisant«d’allégueruniquementquedesindividusprésentaientdessymptômes»compatiblesavec«COVID»car«lesallégationsquisont«simplementcompatiblesavec»laresponsabilitéd’undéfendeur»sontinsuffisantespourformulerunedemandederéparation
En constatant que les écoles maternelles n’avaient pas non plus réussi à établir le deuxième volet, le sixième circuit a expliqué :
[The preschools] also never alleged that the Ohio State shutdown order resulted “directly” (or even indirectly) from disease in the places. Neither could [they] have. The order of the director of health was formulated in general terms and applied to all “establishments offering childcare services”. It was also formulated as a prophylactic measure “to avoid an imminent threat with a high probability of widespread exposure to COVID-19”, and not as a response to a specific disease discovered in the appellants’ preschools or elsewhere.