Ruling Against Dentist’s COVID Business Interruption Insurance Coverage

In the case, Oral Surgeons v. Cincinnati Insurance Company, District Court granted dismissal and summary judgment motions that argued SARS-CoV-2 did not result in a direct physical loss to property. The appeals court agreed with their decision that the business interruption was not a direct physical loss.

The practice, in this case Oral Surgeons, Inc., sustained losses due to government closure of its office building. Oral Surgeons sued Cincinnati for indemnification under its commercial property policy for the income it lost and did not receive while its offices were unavailable to patients. The district court granted oral surgeons’ motion for summary judgment on claims under COVID-19, finding that SARS CoV 2 constituted an indirect rather than a direct physical loss. Oral surgeons appealed on the grounds that there was no dispute about fact that the virus caused damage to both tangible buildings and intangible personal property and equipment such as computers and electric toothbrushes at their dental practice.

The appeals court agreed that SARS-CoV-2 did not cause a direct physical loss to property. According to the ruling, SARS-CoV 2 “caused damage only insofar as it caused a brief interruption of Oral Surgeons’ operations at its Lexington clinic and reduced revenue from lost patients (i.e., those who avoided dental care because they feared infection or could not get an appointment).” The damages were neither physical nor to tangible property, but rather economic in nature. It also found no case law supporting Oral Surgeons’ argument that COVID-19 extended coverage for business interruption losses based on such indirect physical damage to tangible property as was claimed here.

Although the Oral Surgeons case revoked claims that SARS-CoV-2 subjects a business to physical loss, it also rejected the carrier’s argument that the virus did not cause damage to personal property. Oral surgeons argued that COVID policy extends coverage of “all kinds of direct physical loss.”

Cincinnati contested any relation between the virus and damage to equipment because there was no evidence showing that a patient transmitted the disease to any of its equipment or patients, nor was there evidence showing that Cincinnati provided inadequate cleaning services. The appeals court found in favor of Oral Surgeons saying “we are unconvinced by Cincinnati`s argument.”

The court ruling comes at a time when many businesses are reviewing their insurance policies to determine whether coverage is available for losses related to the ongoing 2019 novel coronavirus disease (COVID-19) pandemic, including:

  • Lost profits and other lost business income.
  • Extra expenses incurred because of COVID-19.
  • Amounts they may have to pay to third-parties for COVID-19 related personal injury or property damage for which the business is allegedly liable.

Property damage caused by COVID-19.COVID-19 has been a huge challenge for many businesses and their insurance policies. In this blog post, we’ve discussed how COVID-19 is causing losses to business income as well as other damages such as property damage or personal injury caused by the virus.

– Contributed by 

Bobby Jivnani Dental