The state Supreme Court ruled against a group of medical practices on Friday that contended their insurers wrongly denied claims for reimbursement for pandemic related business losses under the terms of their all risk commercial property coverage.
The medical practices sued three insurers that issued policies with identical language, arguing they were forced to suspend or curtail business because of government orders and incurred further “repair” costs from the daily sanitation of their offices and measures such as construction of Plexiglas barriers to protect patients and staff.
The insurers responded that they were not obligated to pay under the policies because the medical practices did not suffer a “direct physical loss of or physical damage” to their properties.
Had their been any question about “direct” damage, the insurers argued they would have been exempt from paying claims regardless because of a policy exclusion barring payment for loss or damage caused by the “presence, growth, proliferation, spread or any activity of fungi, wet rot, dry rot, bacteria or virus.”
Judge Cesar Noble, who heard the case in the Superior Court, ruled for the insurers on the basis of the virus exclusion and the Supreme Court took the case directly on appeal.
Writing for a unanimous court, Chief Justice Richard Robinson said there was no reason for the justices to even consider the virus exclusion because the policy language does not cover losses arising from government restrictions.
“We agree with the defendants that the insurance policies do not cover the plaintiffs’ losses, and, therefore, we need not decide whether the trial court correctly determined that their claims were subject to the virus exclusion,” the court said.
The medical practices argued that the loss of the use of property due to actual damage is equivalent to their loss of the “productive” use of their properties because of government restrictions.
The court disagreed.
“Instead, we agree with the multiplicity of courts that have concluded that ‘’use of property’’ and ‘’property’’ are not the same thing, and the loss of the former does not necessarily imply the loss of the latter,” the court wrote.
The medical practices argued that their claim of actual property loss is supported by the fact that they were obligated to ‘’to undertake demonstrable, physical repairs” to the properties to bring them back into use, such as erecting barriers and buying personal protective equipment.
“We conclude that, just as the properties were not physically altered in any way by the COVID-19 pandemic, the (medical practices’) activities designed to prevent the transmission of the coronavirus on the properties were not ‘repairs’ in any ordinary sense of the word,” the court wrote.
The suit was brought by Connecticut Dermatology Group, Live Every Day, and Ear Specialty Group of Connecticut, which own and operate healthcare businesses in Connecticut.