286 A.3d 353
Pa. Super. Ct.2022Background
- Plaintiff Timothy Ungarean, a dentist, purchased a commercial-property Businessowners policy (including Business Income & Extra Expense endorsement) from CNA/Valley Forge covering “direct physical loss of or damage to Covered Property.”
- In March 2020 COVID-19 orders restricted non-emergency procedures; Ungarean continued emergency work but suffered substantial lost income and sought coverage for business interruption and extra expenses.
- CNA denied the claim, asserting the policy requires tangible physical loss or damage to trigger coverage; Ungarean sued for declaratory relief and summary judgment.
- The trial court and the Superior Court majority sided with Ungarean, interpreting “direct physical loss of or damage to” to encompass the COVID-related loss of use; the opinion before us is a dissent by Judge Stabile.
- The dissent argues the policy, read as a whole (including the “period of restoration” language), unambiguously requires physical alteration, destruction, or presence of contamination that renders premises unusable/uninhabitable to trigger coverage, and would reverse and enter judgment for the insurer.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held (dissenting view) |
|---|---|---|---|
| Whether “direct physical loss of or damage to property” covers economic loss from COVID-19 restrictions | Ungarean: phrase broadly includes loss of use caused by virus- and order-related restrictions | CNA: phrase requires tangible physical alteration or contamination of property | No coverage absent physical alteration or in situ contamination that makes premises unusable; pure economic loss not covered |
| Role of the “period of restoration” language in defining coverage trigger | Ungarean: period clause is a time limit, not a restriction on what constitutes a loss | CNA: period clause ties coverage to physical repair/replace/rebuild, showing requirement of physical damage or loss | Period of restoration shows policy contemplates physical repair/rebuild and thus supports requiring physical loss/damage |
| Applicability of the Civil Authority extension (coverage when access prohibited due to physical loss at other locations) | Ungarean: civil-authority orders triggered coverage because orders prohibited access and were tied to physical loss concerns | CNA: civil-authority coverage also requires direct physical loss/damage at other locations caused by a Covered Cause of Loss | Dissent: Ungarean failed to show physical loss at other locations; civil-authority extension therefore does not apply |
| Need to consider policy exclusions | Ungarean: exclusions do not bar coverage under the Majority’s reading | CNA: if insured cannot show coverage under insuring clause, exclusions are irrelevant | Dissent: unnecessary to analyze exclusions because insuring clause does not cover pure economic loss |
Key Cases Cited
- Port Authority of New York & N.J. v. Affiliated FM Ins. Co., 311 F.3d 226 (3d Cir. 2002) (invisible contamination constitutes physical loss only if it renders 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 was economic, not a tangible physical loss of property)
- 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 absent physical damage)
- Delaware Valley Mgmt., LLC v. Continental Cas. Co., 572 F. Supp. 3d 119 (E.D. Pa. 2021) (no physical alteration or loss of utility; economic limitations insufficient for coverage)
- In re Society Ins. Co. COVID-19 Bus. Interruption Prot. Ins. Litig., 521 F. Supp. 3d 729 (N.D. Ill. 2021) (found factual issues whether viral presence could be physical loss; later distinguished by several circuits)
- Essex Ins. Co. v. BloomSouth Flooring Corp., 562 F.3d 399 (1st Cir. 2009) (noxious chemical odors can constitute a physical injury when they render the property unusable)