By Matthew Santoni

Law360 (January 20, 2021, 2:53 PM EST) -- Eight words — "direct physical loss of or damage to property," with an emphasis on the "or" — are critical to determining whether businesses should get insurance coverage for losses related to the coronavirus pandemic, the attorney for a Pittsburgh-area dentist told a Pennsylvania state court Wednesday.

That two-letter word in the insurance policy language opens the door for businesses that lost the full use of their premises to the pandemic or its associated government-mandated closures to assert reasonable claims for coverage, said John P. Goodrich of Jack Goodrich & Associates PC, representing Beaver County dentist Timothy Ungarean in the proposed class action against Valley Forge Insurance Co. and its parent company, CNA.

"If the policy said 'direct physical loss and damage,' we wouldn't be here," Goodrich told Allegheny County Court of Common Pleas Judge Christine A. Ward in video arguments. "There's ambiguity because of 'or.'"

Goodrich and attorneys for Valley Forge argued their cross-motions for summary judgment in the case Wednesday, over the question of whether the businesses' pandemic-related losses were covered.

Ungarean, doing business as "All Smiles Dentistry," had been part of a wave of litigants seeking coverage in the spring and summer for losses incurred when the pandemic or government orders intended to reduce the spread of COVID-19 forced them to shut their doors or severely limit the services they offered. Goodrich said Wednesday that the loss of use of Ungarean's premises counted as a "direct physical loss," even if there had been no physical damage to the property.

He said that while courts have split on whether other businesses had viable claims for coverage, the only precedent that mattered was the Supreme Court of Pennsylvania's April ruling in Friends of Danny DeVito et al. v. Tom Wolf , which had upheld the state's virus-related closure orders on the grounds that the virus was "everywhere," it was the "proximate cause" of the closure orders, and it caused "detriment" to property. Since causing "detriment" was part of the definition of "loss," the DeVito case supported the businesses' allegation they had suffered losses as a result of the virus even if they weren't physically damaged, Goodrich said.

"The issue comes down to if you believe that physical loss is different than physical damage; if you believe it's different ... then there is ambiguity," he said. "'And' is not 'or;' physical loss is not physical damage. It can't be within the contract interpretation."

But Robert M. Runyon of Timoney Knox LLP, representing Valley Forge and CNA, said the majority of decisions around the country were on his clients' side — approximately 140 decisions in favor of insurers compared to about 30 decisions in favor of covering businesses' losses.

Runyon said the DeVito case dealt with government orders, not insurance issues, and pointed instead to a Pennsylvania federal court decision Jan. 15 that interpreted "physical loss" as requiring an actual impact to a business's structure, rather than economic losses.

"In certain situations, courts have held 'loss of or damage to' property can include uninhabitability, but plaintiffs' property was never uninhabitable," Runyon said. "They continued to be physically present at the property, to use the property, to do emergency procedures as allowed under the governor's orders."

He said coverage for loss of income would have to flow from the loss of the property, not the other way around.

"Loss of income doesn't become loss of property," Runyon said. "You need some physical, tangible alteration of the property."

Runyon also said summary judgment in the businesses' favor would require Judge Ward to find both that the contract language allowed coverage and that none of the policies' exemptions applied, but the insurer had not presented evidence on the exemptions yet.

Judge Ward agreed to take the parties' arguments under consideration Wednesday.

Ungarean and the proposed class are represented by James C. Haggerty of Haggerty Goldberg Schleifer & Kupersmith PC, Scott B. Cooper of Schmidt Kramer PC, John P. Goodrich of Jack Goodrich & Associates PC and Jonathan Shub of Kohn Swift & Graf PC.

Valley Forge Insurance and CNA are represented by Robert M. Runyon III and Daniel J. Grossman of Timoney Knox LLP, and William Pietragallo II of Pietragallo Gordon Alfano Bosick & Raspanti LLP.

The case is Ungarean v. CNA et al., case number GD-20-006544, in the Court of Common Pleas for Allegheny County, Pennsylvania.

--Editing by Marygrace Murphy.

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