Insurance Coverage and Bad Faith

The lawyers at Houston Harbaugh have built a strong reputation over the past several decades representing insurance companies facing the full spectrum of complex legal challenges. No matter how big or critical the challenge, clients turn to the attorneys in Houston Harbaugh’s Insurance Coverage and Bad Faith practice group for our legal and business insights.

Third Circuit Finds No Coverage For COVID-related Business Income Losses

In a January 6, 2023 precedential decision, the Third Circuit ruled in a consolidated appeal of 14 cases that Pennsylvania and New Jersey businesses are not entitled to coverage for Covid-related business interruption losses, holding that the loss of use of a property's intended business purpose is not a "physical loss of or damage to" property sufficient to trigger coverage. For the same reasons, the panel held that the insured businesses could not establish "civil authority" coverage, particularly where access to the insured properties was not prohibited. Because coverage was not triggered, the panel did not reach the issue of whether the policies' virus exclusions applied.

Following the Third Circuit's 2002 Port Authority decision, the panel reasoned that the virus did not physically alter or damage the business properties; rather the respective governors' closure orders limited the activities of the business properties. As such, the business properties remained intact and functional and were not destroyed either in whole or in part.

Notably, the panel stressed that "physical damage to" property must include a distinct, demonstrable and physical alteration of the structure at issue, where "physical loss of" property means a failure to maintain tangible possession of the structure.

The Third Circuit panel acknowledged that the Pennsylvania Superior Court recently issued two differing decisions on the coverage issue, but stated that the same did not preclude or affect its ruling. The panel predicted that the Pennsylvania Supreme Court would likely follow the overwhelming majority of state and federal jurisdictions in finding that the pertinent policy language is unambiguous and does not provide coverage under the circumstances presented.

A copy of the Third Circuit’s January 6, 2023 decision can be found here.

Please contact Christopher M. Jacobs at 412.288.4019 or with any questions on any of the above.

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Alan S Miller Attorney Houston Harbaugh

Alan S. Miller - Practice Chair

Alan has more than thirty-eight years of experience in complex litigation and counseling, concentrating in the areas of environmental law, insurance coverage and bad faith, and commercial litigation. He chairs the firm’s Environmental and Energy Law practice and the Insurance Coverage and Bad Faith Litigation Practice.

Alan’s environmental law practice has involved counseling, litigation and alternative dispute resolution of matters involving municipal, residual, and hazardous waste permitting and compliance, contribution and cost recovery actions under CERCLA and related state statutes, claims for natural resource damages, contamination from leaking underground storage tanks, air and water pollution regulatory permitting and enforcement actions, oil and gas drilling compliance and transactions, and real estate transactions involving contaminated and recycled industrial sites.