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Law360 (February 23, 2021, 3:32 PM EST) -- American Select Insurance Co. has urged a Pennsylvania federal judge to toss a suit from a hotel seeking coverage for its COVID-19-related losses, arguing the hotel suffered economic losses not covered under its commercial property policy.
The carrier said Monday that the policy's virus exclusion bars coverage and that the owners of the Comfort Suites Hummelstown, which is outside Harrisburg, Pennsylvania, failed to show that their business losses are related to any property damage as required by the policy.
Property damage requires a tangible injury and "Hummelstown does not allege that the virus or resulting government orders 'demonstrably altered the components of its building,' nor could it," American Select said in the dismissal motion.
In December, the hotel owners asked the court to declare losses from pandemic measures ordered by Gov. Tom Wolf to be covered by the contract signed with Westfield Insurance Co. and its parent, American Select, as well as allow compensatory damages from a breach of contract.
The hotel argued the virus exclusion clause applies to damages when a property is subject to actual contamination or outbreak. Damages suffered by the Comfort Suites Hummelstown occurred from social distancing and capacity guidelines enacted by Wolf in the spring, it says in the complaint.
In the motion, American Select said Hummelstown failed to demonstrate that "any order completely prohibited access to its property," since the hotel has contended that it was able to continue using its property despite limiting business operations.
The government closure orders did not "conclude that COVID-19 contaminated Hummelstown's property or that the property experienced a direct physical loss due to COVID-19," so the hotel's position that it experienced property damage from civil authority orders does not stand, the carrier said.
"Hummelstown attempts to sidestep the coverage barrier erected by the virus exclusion" by arguing that the government orders are not related to the virus, but regardless of how it pleads its claimed losses, "the losses flow from COVID-19" and are strictly barred by the virus exclusion.
The hotel has previously argued that American Select should be estopped from applying the virus exclusion because the Insurance Information Services and the American Association of Insurance Services misrepresented the exclusion when it lobbied state insurance regulators for approval in 2006.
On Monday, American Select said it is not forbidden from applying the virus exclusion because Hummelstown has not alleged that American Select specifically has made any statements to regulatory agencies regarding the exclusion.
Counsel for the parties could not be immediately reached for comment Tuesday.
The hotel is represented by Sol H. Weiss, James R. Ronca, Gregory S. Spizer and Paola Pearson of Anapol Weiss.
American Select is represented by Edward M. Koch and Marc Penchansky of White and Williams LLP.
The case is 44 Hummelstown Associates LLC v. Westfield Insurance Co. et al., case number 1:20-cv-02319, in the U.S. District Court for the Middle District of Pennsylvania.
--Editing by Orlando Lorenzo.
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