A Pennsylvania appellate court ruled Wednesday that a dental practice was entitled to coverage for income lost because of the state’s COVID-19 shutdown but a tavern was not.

Policy language made all the difference in outcomes of the separate Superior Court opinions. It was the first time that a Pennsylvania appellate court had ruled on the question of whether SARS-CoV-2 can cause a direct physical loss or damage that is covered by a commercial property insurance policy.

The court determined in a 5-4 ruling that a policy written by CNA for the owner of Smile Savers Dentistry covered the cost of a COVID business interruption but decided unanimously that a policy written by Erie Insurance Exchange for the owner of the Grant Street Tavern did not.

Superior Court President Judge Jack A. Panella explained in a concurring opinion that “…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.”

The Pennsylvania jurists took a course contrary to the direction set by most other courts that have heard such claims. Appellate courts in 18 states, including four high courts, have ruled that COVID-19 either cannot cause direct physical damage or loss to property or did not in the circumstances presented, according to a litigation tracker maintained by the University of Pennsylvania. The vast majority of federal courts that have heard COVID business interruption cases have also rejected coverage.

The Vermont Supreme Court and a Louisiana appellate court, on the other hand, ruled that the virus did cause a covered loss.

With Wednesday’s Superior Court ruling, dentist Timothy A. Ungarean joins a select circle of winning COVID claimants. He said during a brief telephone conversation that he expects CNA to appeal the decision to the Pennsylvania Supreme Court but declined any further comment until he confers with his attorney.

Ungarean owns two Smile Savers dental clinics, one in Pittsburgh and another in Aliquippa. He filed a claim with CNA’s Valley Forge Insurance Co. after Gov. Tom Wolf in March 2020 ordered the closure of all non-essential businesses because of the outbreak of the COVID-19 pandemic. State public health directives allowed him to perform only emergency procedures, causing a “drastic loss of income.”

Judge Christine Ward with the Allegheny Court of Common Pleas ruled that Ungarean was entitled to coverage. CNA appealed. The Superior Court majority said it is in “full agreement” with Ward’s ruling.

The majority opinion says CNA’s policy did not define direct physical loss or damage, so the trial court correctly used a dictionary definition.

“The definition of ‘loss’ includes the loss of possession or deprivation of the property, whereas damage does not; it is therefore reasonable to find that ‘loss of property’ includes the act of being deprived of the physical use of one’s property,” the majority said.

CNA also argued that the shutdown wasn’t covered because the policy excluded damages caused by “fungi, wet rot, dry rot and microbes” as well as losses caused “contamination by other than pollutants.”

The majority opinion said Ungarean did not allege that the virus was present on his property, so the exclusion does not apply. Similarly, the exclusion for “microbes” did not apply because, while the policy defines the term, it does not include “viruses” within that definition.

MacMiles LLC, the owner of the Grant Street Tavern in Pittsburgh, also filed a business interruption claim after the state shut down non-essential businesses. The company filed a lawsuit in Allegheny County after Erie denied the claim.

Erie appealed after Judge Ward denied its motion seeking a summary judgment that no coverage was owed.

An opinion written by four of the nine Superior Court judges cites the large number of court decisions that found the virus cannot cause a direct physical loss of a commercial property. Courts have found that coverage is owed by for properties that became contaminated, but in each of those cases there was some tangible substance that had rendered the property unusable, the court said.

“Ultimately, our analysis, aided by persuasive authority from numerous other federal and state jurisdictions, leads us to conclude the trial court erred in finding that MacMiles established a valid claim for coverage under the business income provisions of the policy,” the opinion says.

Only four Superior Court judges joined in the opinion, but all nine concurred in the result. In his concurring opinion, Judge Panella explained that the court’s review of MacMiles’ claims “is restricted to the specific terms employed in Erie’s policy.”

Top photo: The interior of the Grant Street Tavern in Pittsburgh is shown. Photo courtesy of Foursquare.