MacMiles, LLC v. Erie Insurance Exchange
286 A.3d 331
| Pa. Super. Ct. | 2022Background
- MacMiles, LLC (Grant Street Tavern) sought business-income coverage under its commercial property policy after dine-in service was halted by Pennsylvania COVID-19 orders.
- The Policy insured against “direct physical loss of or damage to Covered Property” and included an Income Protection provision tied to interruption “resulting directly from ‘loss’ or damage.”
- Erie denied coverage, arguing the losses were purely economic and not caused by any physical damage to the insured premises.
- The trial court granted partial summary judgment for MacMiles on the business-income claim, found a triable issue under the Civil Authority clause, and certified the order for interlocutory appeal.
- The Superior Court reviewed the policy de novo, concluded there was no physical damage or loss of utility to the building, and reversed—directing judgment for Erie on the coverage issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether “direct physical loss of or damage to Covered Property” covers loss of use from COVID restrictions | MacMiles: “loss” (distinct from “damage”) can mean deprivation of use; policy ambiguous so construed for insured | Erie: Phrase requires physical alteration or condition making property unusable; mere loss of use is economic loss | Court: Held for Erie—physical damage or loss of utility required; mere economic losses from shutdown not covered |
| Whether Civil Authority coverage applies when government orders prohibit access nearby | MacMiles: Orders responded to dangerous conditions; virus presence at nearby properties could satisfy damage requirement | Erie: Civil Authority requires physical damage to other property within defined area; no showing of such damage | Court: Held for Erie—no alleged physical damage to nearby property rendered it unusable; civil-authority coverage fails |
| Applicability of Policy’s Ordinance/Governmental Authority exclusion | MacMiles: Exclusion inapplicable (trial court had not applied it) | Erie: Exclusion could bar coverage if applicable | Court: Did not reach exclusion because no coverage exists on the merits |
Key Cases Cited
- Port Authority of New York & New Jersey v. Affiliated FM Ins. Co., 311 F.3d 226 (3d Cir. 2002) (invisible contamination triggers coverage only if building is rendered unusable or uninhabitable)
- Terry Black’s Barbecue, L.L.C. v. State Auto. Mut. Ins. Co., 22 F.4th 450 (5th Cir. 2022) (COVID-related dine-in prohibitions caused economic, not physical, loss)
- Sandy Point Dental, P.C. v. Cincinnati Ins. Co., 20 F.4th 327 (7th Cir. 2021) (commercial-property policies do not cover COVID-19 business interruptions)
- Mudpie, Inc. v. Travelers Cas. Ins. Co. of Am., 15 F.4th 885 (9th Cir. 2021) (business interruption from pandemic not covered absent physical property damage)
- Santo’s Italian Café LLC v. Acuity Ins. Co., 15 F.4th 398 (6th Cir. 2021) (similar conclusion that policy covers physical injury, not economic loss)
- Essex Ins. Co. v. BloomSouth Flooring Corp., 562 F.3d 399 (1st Cir. 2009) (chemical/odor can constitute physical injury when it renders property unusable)
- TRAVCO Ins. Co. v. Ward, 715 F. Supp.2d 699 (E.D. Va. 2010) (noxious fumes from defective drywall constituted direct physical loss)
- Philadelphia Parking Authority v. Federal Ins. Co., 385 F. Supp.2d 280 (S.D.N.Y. 2005) (economic losses from lost business are not property damage)