By Mike Curley

Law360 (September 23, 2020, 4:32 PM EDT) -- A Missouri federal judge will let a proposed class action by four dental offices go ahead with allegations that their insurance company wrongly denied their bids for coverage of losses sustained because of the COVID-19 pandemic, bucking the recent trend of dismissals of such cases.

In an order filed Monday, U.S. District Judge Stephen R. Bough denied Owners Insurance Co.'s motion to dismiss the suit led by Blue Springs Dental Care LLC, making the case the third suit in the district over COVID-19 coverage to get past the dismissal stage, according to an attorney representing the dentists.

While in other cases judges have found that "physical loss or damage" must refer to physical alteration, Judge Bough cited an August decision in Studio 417 Inc. et al. v. The Cincinnati Insurance Co. that found the term can include loss of use without physical damage, and adopted that definition.

With that definition in mind, the dentists have successfully alleged their reduction in services resulting from the outbreak and government orders triggers the policy's business interruption clauses, allowing the case to move forward.

This case marks the third COVID-19 business interruption suit in the Western District of Missouri to make it past dismissal and the fourth nationally, with the K.C. Hopps Ltd. v.  The Cincinnati Insurance Company Inc. getting the go ahead in August, and a New Jersey Superior Court case, Optical Services USA/JCI v. Franklin Mutual Insurance Co., also moving ahead after the judge last month rejected the insurer's argument that COVID-19 did not trigger coverage for physical loss.

Like dozens of other businesses in the last several months, Blue Springs Dental and three other dental offices sued in May, alleging their insurer had denied business interruption coverage after they were forced to close or reduce operations in response to government orders to stem the spread of COVID-19.

In applying the Studio 417 definition of loss, Judge Bough found that the dentists had adequately pled their case by explaining the likelihood that employees and others at the offices had brought the virus into the premises, and they suspended operations to prevent its proliferation, effectively depriving them of the ability to use their facilities.

While Owners argued business was not "suspended" as required under the policy because the dentists could continue essential services, the judge wrote that the policy does not define "suspension," while other provisions in the policy contemplate "suspension" to include limited, not entirely ceased, operations.

The judge also noted that three of the four dentists did entirely close all operations.

Owners also took aim at the complaint with an argument that the dentists failed to identify a "period of restoration" during which they needed to repair, rebuild or replace property, but the judge noted that the dentists allege their operations closed down on or around March 17, identifying the start of a still-ongoing period of restoration.

While the insurer also argued the dentists would have to show that COVID-19 made their clinics unusable or uninhabitable to recover, the judge noted this is an argument to the extent of physical loss, one that is better suited for the summary judgment stage.

Turning to the civil authority clause in the policies, the judge rejected Owners' argument that a civil order would have to refer to the clinics specifically to apply, saying there is no such policy language that creates that limit, and the complaint successfully alleges the orders in aggregate limited access to the facilities.

The judge also declined to strike class allegations from the suit, saying it's too early in the process for that determination to be made.

"While there have been courts which have issued reasoned orders dismissing similar lawsuits, all but one of those lawsuits involved policies with a virus exclusion," Patrick J. Stueve of Stueve Siegel Hanson LLP, representing the dentists, told Law360 on Wednesday. "Blue Springs Dental, and the other plaintiffs who survived a motion to dismiss, purchased policies without an exclusion and ask the insurer to honor the promises in those policies."

Representatives for Owners could not immediately be reached for comment Wednesday.

Owners is represented by George F. Verschelden, Todd A. Noteboom and Emily M. Asp of Stinson LLP.

The dentists are represented by Patrick J. Stueve, Bradley T. Wilders and Curtis Shank of Stueve Siegel Hanson LLP, John J. Schirger, Matthew W. Lytle and Joseph M. Feierabend of Miller Schirger LLC and J. Kent Emison of Langdon & Emison LLC.

The case is Blue Springs Dental Care LLC et al. v. Owners Insurance Co., case number 4:20-cv-00383, in the U.S. District Court for the Western District of Missouri.

--Additional reporting by Jeff Sistrunk. Editing by Janice Carter Brown.

Update: This story has been updated with additional information about other COVID-19 coverage cases that have moved past dismissal.

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