Appeals court to hear dispute over insurance coverage for COVID-19 shutdowns
Apr. 10—Attorneys for a Scranton social club will appear before the state Superior Court this week in hope of overturning a judge's ruling that denies insurance coverage for losses suffered during pandemic-related shutdowns in 2020.
The Scranton Club filed suit in June 2020 against Tuscarora Wayne Mutual Group, alleging the company wrongly denied its claim under the business interruption portion of its policy.
The lawsuit is among thousands of suits filed nationwide that challenge denial of coverage for pandemic-related shutdowns. As of Jan. 16, 2,364 cases were filed in state and federal court, according to statistics compiled by the University of Pennsylvania Law School, which is tracking the cases.
Most of the cases have hinged on exclusions within the insurance policies that bar recovery if losses are caused by a virus and/or a dispute over whether the virus can be found to have caused physical damage.
Locally, the Scranton Club case is among three that Lackawanna County Judge Terrence Nealon ruled on.
Nealon denied insurers' motions to dismiss lawsuits filed by SWB Yankees LLC, the owners of the RailRiders minor league baseball team, and Brown's Gym in Clarks Summit. The judge agreed that shutdowns caused by the COVID-19 virus could equate to physical damage. The cases remain pending in Lackawanna County Court.
Nealon granted Tuscarora's motion in the Scranton Club case, however. The key difference is the Scranton Club did not allege in its lawsuit that the virus was present in the building, therefore it could not prove any direct physical loss or damage, Nealon said.
The Scranton Club appealed the ruling to the Superior Court. Attorneys for the club and insurance company will appear before the court on Wednesday to argue the merits of their positions.
The Scranton lawsuit is one of several cases before the appellate court. It has drawn the interest of several insurance associations, which filed legal briefs in support of Tuscarora's position.
The final outcome of the appeal in the case and others that make similar claims will have significant ramifications for the insurance industry, attorneys said.
Should insurers prevail, thousands of businesses would have to absorb the losses they incurred, said Dan Munley, whose law firm represents the Scranton Club
"It's a typical tactic of insurance companies to look for any way to get around paying on a policy where they collected premiums for decades," Munley said. "I'm much more concerned about the mom-and-pop businesses that lost everything as a result of the pandemic than I am for billionaire insurance companies."
In a statement, Ken Stoller, assistant vice president, American Property Casualty Insurance Association, said business interruption insurance covers destruction of property caused by things like a fire or weather event. Should the courts interpret the COVID virus equates to physical damage, it could undermine the stability of the insurance industry and its ability to pay claims.
"These policies are not intended to cover diseases or pandemic-related losses," Stoller said. "In the vast majority of cases, insurers did not price policies to include such coverage, and policyholders did not pay for it."
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