By Bill Wichert

Law360 (March 31, 2021, 3:45 PM EDT) -- A New Jersey federal judge on Wednesday added to the growing body of decisions that an insurance policy's virus exclusion bars coverage for losses related to the coronavirus outbreak, finding that such a clause eviscerated a child care center's proposed class action against Selective Insurance Group Inc.

Following a series of similar rulings in recent months, U.S. District Judge Michael A. Shipp granted the insurer's motion to dismiss the suit from Quakerbridge Early Learning LLC, doing business as Kiddie Academy of Hamilton, over the company's refusal to cover losses incurred by the center because of government restrictions aimed at curbing the spread of COVID-19.

The judge said in a written opinion that he found "no reason to deviate from this growing line of recent opinions and finds that the virus exclusion clearly and unambiguously bars coverage for plaintiff's claims."

"While the court is sympathetic to the struggles plaintiff and businesses throughout the country have faced during the COVID-19 pandemic, it may not ignore the plain language of the policy, nor 'rewrite the contract for the benefit of either party,'" said Judge Shipp, citing a Feb. 16 New Jersey federal court decision in Del. Valley Plumbing Supply Inc. v. Merchs. Mut. Ins.

Quakerbridge sought coverage from Selective for its losses after having to suspend its ordinary operations as of March 31, 2020, following an executive order from New Jersey Gov. Phil Murphy "mandating all daycare facilities to close except those that met stringent measures and are offering services to children of essential workers," the complaint said.

The governor later issued another executive order enabling the facilities to resume operations on June 15, the complaint said. After Selective denied Quakerbridge's claims, the center launched the proposed class action on June 25 against Selective and a subsidiary.

Quakerbridge sought to represent a class of child care centers insured by Selective and the subsidiary "who have been denied business interruption coverage for lost income and/or extended expenses as a result of civil authority orders issued in response to the COVID-19 pandemic," according to the complaint.

In seeking to toss the complaint, Selective argued that coverage was prohibited under the virus exclusion in Quakerbridge's policy, which said: "We will not pay for loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease."

While Quakerbridge asserted that the plain language of the exclusion is ambiguous, Judge Shipp on Wednesday noted that "a significant number of courts, both in [the Third] Circuit and across the country, have analyzed virus exclusion clauses that were either identical or highly similar to the one in plaintiff's policy, and consistently reached the same conclusion — that the virus exclusion bars coverage," citing Del. Valley Plumbing Supply.

As an example, the judge pointed to U.S. Chief District Judge Freda L. Wolfson's Feb. 10 opinion that a virus exclusion barred a group of car dealerships from obtaining coverage from Zurich American Insurance Co. for losses related to the pandemic.

Judge Shipp noted how Judge Wolfson rejected the dealerships' assertion that the clause was ambiguous and could be subject to "an interpretation that the exclusion bars 'coverage caused by a virus actually present at the insured premises or that has infected the insured's employees.'"

In an excerpt cited in Judge Shipp's opinion, Judge Wolfson said, "The provision in no way suggests that the virus must be present at the insured property for the exclusion to apply. Indeed, to accept plaintiffs' interpretation would require the court to add additional language that does not appear in the policy."

"The court also rejected the plaintiffs' argument that their virus exclusion clause did not apply because their injuries were caused by Governor Murphy's orders, not COVID-19," Judge Shipp added.

Counsel for the parties did not immediately respond to requests for comment Wednesday.

Quakerbridge is represented by Arnold Levin, Laurence S. Berman, Frederick Longer, Daniel Levin and Michael M. Weinkowitz of Levin Sedran & Berman LLP, Richard M. Golomb and Kenneth J. Grunfeld of Golomb & Honik PC, Aaron Rihn of Robert Peirce & Associates and W. Daniel "Dee" Miles III, Rachel N. Boyd and Paul W. Evans of Beasley Allen Crow Methvin Portis & Miles PC.

Selective is represented by Elizabeth J. Sher and Joseph K. Scully of Day Pitney LLP.

The case is Quakerbridge Early Learning LLC v. Selective Insurance Co. of New England et al, case number 3:20-cv-07798, in the U.S. District Court for the District of New Jersey.

--Editing by Amy Rowe.

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