1 S.A.N.T., INC. v. BERKSHIRE HATHAWAY, 513 F.Supp.3d 623

Background

Plaintiff 1 S.A.N.T., a restaurant/event center, purchased a commercial property policy covering "direct physical loss of or damage to" covered property for June 1, 2019–June 1, 2020.
Pennsylvania issued COVID-19 emergency orders (Governor Wolf's March 19, 2020 order) closing non-life-sustaining businesses; 1 S.A.N.T. lost business income and continued expenses.
1 S.A.N.T. notified insurer National Fire of its claim; National Fire denied coverage on June 4, 2020.
1 S.A.N.T. filed a putative class action seeking business-interruption coverage; National Fire moved to dismiss under Rule 12(b)(6).
National Fire argued (1) no "direct physical loss or damage" occurred, (2) a Virus Exclusion bars coverage, and (3) civil-authority coverage is not triggered because access was not prohibited; 1 S.A.N.T. countered that loss of use, regulatory orders, or ubiquitous virus presence suffice.
The Court granted the insurer's motion: the policy requires tangible, physical impact to the premises and the governor's orders did not produce the necessary physical loss to invoke coverage or civil-authority protection.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the Policy was triggered by a "direct physical loss of or damage to" covered property	Loss of use/uninhabitability from COVID-19 orders suffices; physical alteration not required	Policy requires tangible, physical impact to structure or property	Held: "direct physical loss or damage" requires physical impact to property; plaintiff's allegations insufficient
Whether ubiquitous presence of SARS‑CoV‑2 constitutes "physical loss or damage"	Virus particles are physical and ubiquitous; their presence makes premises unsafe and thus damaged	Even if physical, ubiquity does not transform economic limitations into covered physical damage; pleading does not allege presence on premises	Held: Ubiquity theory rejected; presence/ubiquity does not meet policy's plain meaning of physical loss here
Whether the Virus Exclusion (if applicable) precludes coverage	Governor's orders were the efficient proximate cause of loss, not the virus; regulatory estoppel argued	Virus Exclusion excludes COVID-19-related losses	Court did not need to resolve exclusion because no covered physical loss was pleaded (dismissal on threshold grounds)
Whether Civil Authority coverage was triggered by Governor Wolf's orders	Orders prohibiting certain business operations should trigger civil-authority coverage	Civil Authority requires prohibition of access due to physical loss/damage to other property; orders did not prohibit access and no physical loss to other property alleged	Held: Civil Authority not triggered — access was not prohibited and no qualifying physical loss to other property was pleaded

Key Cases Cited

Reliance Ins. Co. v. Moessner, 121 F.3d 895 (3d Cir. 1997) (policy plain language controls)
Pacific Indemnity Co. v. Linn, 766 F.2d 754 (3d Cir. 1985) (clear, conspicuous exclusions enforceable)
McMillan v. State Mutual Life Ins. Co., 922 F.2d 1073 (3d Cir. 1990) (ambiguities construed against insurer)
Betz v. Erie Insurance Exchange, 957 A.2d 1244 (Pa. Super. Ct. 2008) (burden-shifting in ‘‘all risks’’ coverage: insured shows loss, insurer shows exclusion)
Port Authority Trans–Hudson Corp. v. Affiliated FM Ins. Co., 311 F.3d 226 (3d Cir. 2002) (physical contamination may constitute property damage when use is nearly eliminated)
Hampton Foods, Inc. v. Aetna Casualty & Surety Co., 787 F.2d 349 (8th Cir. 1986) (unsafe conditions that force abandonment can support business‑income claim)
Murray v. State Farm Fire & Casualty Co., 509 S.E.2d 1 (W. Va. 1998) (loss may exist without structural damage where property is rendered unsafe/uninhabitable)
Travco Insurance Co. v. Ward, 715 F. Supp. 2d 699 (E.D. Va. 2010) (physical damage not always required when property is rendered unusable)