Another federal court has dismissed a COVID-19 virus-coverage lawsuit brought by a company that had its business-interruption claim denied by its insurance carrier.
In Agilitas USA vs. Hartford Fire Insurance Co., the U.S. District Court for Middle Tennessee found that the insurance policy contained a virus exclusion. That barred payment for the physical therapy firm’s loss of income, which was forced when the Tennessee governor shut down non-essential businesses early in the pandemic.
Agilitas, doing business as Results Physiotherapy, had argued that Hartford’s denial was inappropriate because the loss of revenue was not the result of the coronavirus, but was due to the governor’s shutdown order.
U.S. District Judge Aleta Trauger didn’t buy it.
“The plaintiff’s loss or damage was inescapably ’caused directly or indirectly’ by the coronavirus, and the virus exclusion clause applies,” the judge wrote in a Nov. 2 memorandum about the dismissal order.
Agilitas, which has physical therapy centers in eight Southern states and in Indiana, also argued that the business income clause of the policy applied. But the judge said that clause provides coverage only for “direct physical loss” or damage to the plaintiff’s properties.
“The plaintiff devotes a substantial quantity of ink to its argument that the policy does not define the terms ‘damage’ or ‘loss’ and that, under Tennessee law, the court must interpret these terms in the disjunctive, as distinct from each other, and that the term ‘loss’ should be construed to encompass its loss of access to the covered premises,” Trauger wrote.
The judge disagreed with the plaintiff, citing a September ruling by the U.S. 6th Circuit Court of Appeals in an Ohio case. In Henderson Road Restaurant Systems vs. Zurich American Insurance Co., the appeals court held that the policy’s coverage for direct physical losses did not apply to loss of income from the COVID shutdown.
The Agilitas ruling in Tennessee came the same day that the 6th Circuit affirmed the dismissal of a similar lawsuit brought by preschools in Ohio. The centers had argued that the insurance company, Philadelphia Indemnity, had wrongfully denied their business interruption claim. The shutdown orders did not cause physical damage to the business, the appeals court said.
Nationwide, virus coverage suits have fared poorly in the courts, especially in federal courts. The University of Pennsylvania Law School’s litigation tracker reports that in federal courts, insurers have asked that 509 suits be dismissed. Judges have agreed to dismiss 93% of those. Most of those have been dismissed with prejudice and cannot be filed again.
In the Agilitas case, the plaintiffs did not make the argument that seems to have gained some traction in at least one federal courtroom. In Novant Health Inc. vs. American Guarantee and Liability Insurance, in North Carolina, attorneys for the health system maintained that the virus had physically damaged the air inside the clinics.
For that and because of contradictory language in the insurance policy, the U.S. District Court in North Carolina has made a rare exception and has allowed the lawsuit to proceed.
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