Cincinnati Insurance Co. does not need to cover Covid-related business losses from an oral surgery practice, the Eighth Circuit ruled, scoring a huge victory for insurers.
The U.S. Eighth Circuit Court of Appeals on Friday became the first federal appeals court to directly address the issue of whether insurance policies against physical loss or damage to an insured’s premises include lost revenue resulting from closures aimed at slowing the spread of the coronavirus.
The dental office policy covers loss of income and additional expenses incurred during a “period of restoration”, thus involving physical damage, Judge Roger L. Wollman wrote for the court.
“The fact that the policy provides coverage until the property” is repaired, rebuilt or replaced “or until business resumes elsewhere assumes a physical alteration of the property, not a mere loss of use.” , did he declare.
Companies struggling financially during the pandemic have filed at least 1,906 lawsuits against their insurers after being denied coverage. Most lower courts have ruled in favor of insurers, raising the stakes for companies as they wait for the results of more than a hundred cases pending before appeals courts.
The Eighth Circuit decision involved Oral Surgeons PC, a group of four oral surgery clinics in Iowa. After being forced to suspend elective dental procedures due to government warrants of Covid-19, Oral Surgeons sued Cincinnati Insurance after the dental group’s April 2020 claim under its all-risk insurance policy has been refused.
The Southern District of Iowa U.S. District Court ruled in favor of Cincinnati Insurance after the case was transferred there from the Iowa state court.
Cincinnati Insurance’s parent company, Cincinnati Financial Corp. is the third-most sued insurer for Covid coverage, according to the University of Pennsylvania’s Covid Coverage Litigation Tracker. The company is said to be the first insurer in the country to lose its bid to avoid paying for Covid losses, when a North Carolina state judge ruled against it in October 2020.
In its brief filed with the Eighth Circuit, Cincinnati Insurance argued that its policy requires a “real and tangible change in ownership” to claim coverage, citing numerous court decisions with similar reasoning.
But oral surgeons have focused on defining the loss policy as “accidental physical loss or accidental physical damage” to property. The dental office argued that the definition has two different meanings, opening the door to “loss” to include loss of use of its premises.
The National Association of Mutual Insurance Companies and the American Property Casualty Insurance Association have both filed amicus briefs on behalf of Cincinnati Insurance.
The Restaurant Law Center filed an amicus brief on behalf of oral surgeons, emphasizing the importance of the case to the restaurant industry. Restaurants are at the top of Covid-related loss suits against insurers.
The case is Oral Surgeons, PC v. Cincinnati Ins. Co., 8th Cir., No. 20-03211, 7/2/21.