By Matthew Santoni

Law360 (April 28, 2020, 7:28 PM EDT) -- Businesses claiming that they lost income amid COVID-19 closures hit Hartford Underwriters, Liberty Mutual and Cincinnati Insurance with lawsuits demanding coverage in Pennsylvania federal court Monday.

Two restaurants and a music venue filed proposed class actions against Hartford Underwriters Insurance Co. and The Cincinnati Insurance Co. respectively, while a Philadelphia periodontics practice filed an individual suit against Liberty Mutual Insurance Group.

All argued to the U.S. District Court in Philadelphia on Monday that they had been wrongly denied claims for lost business because of statewide orders closing nonessential businesses to slow the spread of the coronavirus. They said the state- and city-mandated closures were "civil authorities" covered by their policies and not directly related to any contamination by the virus.

"Efforts to prevent exposure to COVID-19 have caused civil authorities throughout the country to issue orders requiring the suspension of non-essential businesses and preventing citizens from leaving home for non-essential purposes," the class action complaints both said. "Plaintiffs experienced a 'covered cause of loss' by virtue of the closure orders, which denied use of the premises by causing a necessary suspension of operations during a period of restoration. The closure orders operate as a blockade that prevents employees and patrons from entering and operating the business for its intended purpose."

All the plaintiffs in Monday's cases had "all-risks" insurance policies that contained limited exemptions, which they argued in their complaints should not apply to the extraordinary state- and nationwide shutdowns and stay-at-home orders intended to limit COVID-19's spread. They argued that their insurers had breached their contracts by denying them coverage, and sought declaratory judgments from the court that the coronavirus shutdowns were covered.

Many other restaurants and businesses have made similar claims as the shutdowns continued through April, with some seeking the formation of multidistrict litigation in the Philadelphia federal court to consolidate and handle some of the suits.

Pennsylvania Gov. Tom Wolf had recommended a statewide shutdown March 16 and issued an order March 19 that all "non-essential" businesses close their physical locations in order to reduce person-to-person interaction and the spread of the highly contagious coronavirus. As a result, much of the service industry had shut down, with some exceptions for carryout and delivery service only.

Milkboy Philadelphia, a bar, restaurant and music venue, filed one of the proposed class action suits Monday against Cincinnati Insurance and a number of other defendants, seeking to represent Cincinnati customers nationwide that had business income, extended business income, extra expense or civil authority insurance policies. Subclasses would cover customers that were either denied claims for losses related to the closure orders, or were seeking declaratory judgment that such claims should be covered.

"None of the policy's provisions contain any exclusion for losses caused by a virus or by governmental orders issued in order to prevent exposure to a virus. No other exclusions in the policies apply to this coverage," Milkboy's complaint said.

The law firm representing Milkboy also filed a proposed class action on behalf of owners of two restaurants — Stove and Tap, with locations in Landsdale and Malvern, Pa., and Al Pastor in Exton, Pa. — against Hartford Insurance and The Hartford Financial Services Group Inc.

The restaurants had insurance plans and were denied COVID-19 coverage by Hartford, and were now seeking to represent nationwide classes of Hartford customers that had business income or civil authority policies and were either denied or seeking declaratory judgments that they should be covered.

Like Milkboy, Al Pastor and Stove and Tap argued that the state shutdown, not the virus, was the underlying cause of their closures. In the restaurants' case, that let them avoid the exceptions in their policies for losses caused by viral or bacterial contamination.

"There was no presence of the COVID-19 virus at plaintiffs' covered properties," the restaurants' complaint said. "The special property coverage form's exclusion of 'virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease' is not applicable. Plaintiffs' covered cause of loss is not the virus, but rather the effect of the closure orders as the presence or absence of the COVID-19 virus would have no effect upon the closure or the loss of business inasmuch as the stay at home orders apply to all non-essential businesses regardless of their exposure to the virus."

A Philadelphia periodontist, Laudenbach Periodontics and Dental Implants Ltd., filed an individual claim against Liberty Mutual on Monday, arguing the insurer had wrongly denied it coverage under the virus exemption in its policy and had incorrectly claimed there had to be physical loss, damage or blocked access to the office to trigger the practice's civil authority coverage.

"Loss of use of property, as here, constitutes physical loss or damage," Laudenbach's complaint said. "The virus and bacterium exclusion does not apply because plaintiff's losses were not directly caused by a virus, bacterium or other microorganism. Instead, plaintiff's losses were caused by the civil authority orders issued by Governor Wolf, the Pennsylvania Department of Health and the City of Philadelphia to mitigate the spread of COVID-19 in the future."

While the government orders had not physically blocked entry to the dental offices, the state's criteria for staying open during the pandemic — including "negative pressure" rooms to keep out viruses and bacteria from outside and N-95 filtration masks for staff — were too restrictive for Laudenbach to meet.

With the COVID-19 virus so easily spread through close contact and "aerosolized" particles of saliva produced in a dental office, Laudenbach Periodontics was particularly vulnerable and could not safely operate under the state and city shutdowns, the complaint said.

Representatives of Cincinnati, Hartford and Liberty Mutual declined to comment Tuesday. Counsel for the plaintiffs did not immediately respond to requests for comment.

Milkboy, Al Pastor, and Stove and Tap are represented by Daniel E. Bacine, Mark R. Rosen, Jeffrey A. Barrack, Stephen R. Basser and Meghan J. Talbot of Barrack Rodos & Bacine.

Laudenbach Periodontics is represented by Sol H. Weiss, James R. Ronca, Gregory S. Spizer, Ryan D. Hurd, and Paola Pearson of Anapol Weiss.

Counsel information for the insurers was not immediately available.

The cases are Milkboy Center City LLC v. The Cincinnati Insurance Co. et al., case number 2:20-cv-02036; Lansdale 329 Prop LLC et al. v. Hartford Underwriters Insurance Co. et al., case number 2:20-cv-02034; and Laudenbach Periodontics v. Liberty Mutual Insurance Group et al., case number 2:20-cv-02029; all in the U.S. District Court for the Eastern District of Pennsylvania.

--Editing by Bruce Goldman.

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