286 A.3d 331
Pa. Super. Ct.2022Background
- MacMiles, LLC (Grant Street Tavern) sued Erie Insurance after Erie denied coverage for business losses caused by COVID-19 restrictions.
- Erie’s policy insured against "direct physical loss of or damage to Covered Property" and included Income Protection and a Civil Authority additional coverage tied to physical damage.
- Governor Wolf’s COVID-19 orders prohibited in-person dining but allowed takeout/delivery; MacMiles alleged loss of use of its premises and sought coverage for business-income losses.
- The trial court granted partial summary judgment to MacMiles on Income Protection and found a triable issue under Civil Authority; Erie moved for judgment on the pleadings.
- The Superior Court reviewed the policy de novo and concluded the undisputed facts show no physical alteration or condition of the premises making it unusable or uninhabitable.
- Court reversed the trial court: no coverage under Income Protection or Civil Authority on these facts and directed judgment on the pleadings for Erie; it did not reach the Ordinance/Law exclusion.
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-19 restrictions (Income Protection) | "Physical loss" can be distinct from "damage"; loss of use caused by pandemic/government orders is a covered direct physical loss. | Policy requires physical alteration or condition of the property; mere economic loss or restricted use without physical damage is not covered. | No coverage: phrase requires physical damage or a condition rendering property unusable/uninhabitable; mere loss of use from orders insufficient. Judgment on the pleadings for Erie. |
| Whether Civil Authority coverage applies where access was prohibited due to COVID-19 in the area | Governor's orders prohibited access and were in response to dangerous conditions, so Civil Authority coverage applies. | Civil Authority coverage requires physical damage to nearby property causing the prohibition; no such physical damage is alleged. | No triable issue: no alleged physical damage to nearby property rendering it unusable; Civil Authority coverage not triggered. judgment for Erie. |
| Whether the Policy's Ordinance/Governmental Authority exclusion bars recovery | (MacMiles) exclusion inapplicable or does not defeat coverage on these facts. | (Erie) exclusion might preclude coverage; but Erie raised it as alternative defense. | Not reached: court resolved coverage against insured and therefore did not decide applicability of the exclusion. |
Key Cases Cited
- Port Authority of New York & New Jersey v. Affiliated FM Ins. Co., 311 F.3d 226 (3d Cir. 2002) (invisible contamination constitutes "physical loss" only if it renders the building unusable or uninhabitable)
- Terry Black's Barbecue, L.L.C. v. State Auto. Mut. Ins. Co., 22 F.4th 450 (5th Cir. 2022) (loss of dine-in business from COVID-19 restrictions is economic, not physical, loss)
- Santo's Italian Café LLC v. Acuity Ins. Co., 15 F.4th 398 (6th Cir. 2021) (commercial-property policies for "physical loss or damage" do not cover pandemic-related economic losses)
- Sandy Point Dental, P.C. v. Cincinnati Ins. Co., 20 F.4th 327 (7th Cir. 2021) (commercial policies unambiguously require physical harm for coverage)
- 10012 Holdings, Inc. v. Sentinel Ins., 21 F.4th 216 (2d Cir. 2021) (similar holding that COVID-19 business interruptions without physical property alteration are not covered)
- Philadelphia Parking Auth. v. Federal Ins. Co., 385 F. Supp. 2d 280 (S.D.N.Y. 2005) (economic losses from business interruption are not property damage)
- Essex Ins. Co. v. BloomSouth Flooring Corp., 562 F.3d 399 (1st Cir. 2009) (invisible conditions may be "physical" when they physically injure or render property unusable)