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Law360 (June 22, 2021, 7:30 p.m. EDT) – A New Jersey state judge said on Tuesday that excluding a virus from an insurance policy was preventing a medical office and related entities from obtaining Hanover Insurance Group coverage for losses resulting from government restrictions imposed in Garden State and Pennsylvania to curb the spread of COVID-19.
In a decision echoing many rulings in favor of insurers, Superior Court Judge Joseph W. Oxley granted an offer to Hanover and its subsidiary Massachusetts Bay Insurance Co. elective medical and surgical acts.
The judge found in a telephone hearing that the plaintiffs were not entitled to coverage for the financial impact of these orders because they had not suffered “direct physical loss or damage” to property, such as the ‘demands the police in question. Even if they had, coverage was still not available due to the exclusion of viruses from the policy, the judge said.
This exclusion prohibits coverage for “loss or damage caused directly or indirectly by … any virus, bacteria or other microorganism that induces or is capable of inducing physical distress, illness or disease,” according to court documents.
“This language is unambiguous and should be interpreted according to its ordinary meaning,” Justice Oxley said, referring to the exclusion and later adding that “COVID-19 is the cause of government action in this case.”
The Plastic Surgery Center, which had 37 sites between New Jersey and Pennsylvania covered by the policy, launched its initial trial in June 2020 and an amended complaint the following month, along with an outpatient surgery center and service organization. Management.
Hanover and Massachusetts Bay were named as the original defendants, and the amended lawsuit added claims against the plaintiffs’ insurance broker, NorthEast Insurance Services.
The plaintiffs sought a declaratory judgment that they were entitled to coverage under the policy for their losses related to orders issued in March 2020 by New Jersey Gov. Phil Murphy and Pennsylvania Gov. Tom Wolf, both of which prohibited elective procedures in these facilities. These restrictions have since been lifted.
Seeking summary judgment on the claims against them, Hanover and Massachusetts Bay cited the exclusion of the virus and, among other arguments, claimed that the plaintiffs had not suffered “direct physical loss or damage to” property. . This policy requirement was not met since the locations of the plaintiffs were not physically altered, the companies argued in a brief.
In support of this position, the companies referred to the 2009 Opinion of the State Appeal Division in Wakefern Food Corp. vs. Liberty Mut. Fire Ins. Co., which overturned an insurer’s victory in a power outage coverage dispute. This insurer found and a court of first instance agreed that “the offsite networks were not physically damaged but were rather intentionally shut down as a preventive security measure,” according to the brief.
The appeal board concluded that “the power grid was undoubtedly physically damaged because the grid and components” were physically unable to perform their essential function of providing electricity, “” said the brief.
The Plastic Surgery Center and other plaintiffs countered in a brief that their “loss of use and loss of functionality of its business constitutes” physical loss “under the policy and triggers coverage.” Wakefern “has broadly interpreted the term” physical damage “to include loss of use and functionality,” the plaintiffs said.
Siding with Hanover and Massachusetts Bay, Judge Oxley noted Tuesday that, under Murphy’s Orders in Council, plaintiffs were always open to business, with the exception of elective proceedings. The plaintiffs “were still seeing patients and running their businesses, just at reduced capacity,” the judge said.
“This tribunal concludes that this case does not meet the standard of ‘physical loss or damage’ as described in Wakefern,” added Judge Oxley.
Lawyers for the parties did not immediately respond to requests for comment on Tuesday.
The applicants are represented by James A. Maggs, Michael M. DiCicco, Stephanie L. Deluca and Kyle R. Tognan of Maggs McDermott & DiCicco LLC.
Hanover and Massachusetts Bay are represented by Jeremiah L. O’Leary and Jonathan M. Zagha of Finazzo Cossolini O’Leary Meola & Hager LLC.
The case is the Center for Plastic Surgery PA et al. v. The Hanover Insurance Group Inc. et al., Case Number L-1874-20, in New Jersey Superior Court, Monmouth County.
–Edited by Amy Rowe.
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