By Matt Fair

Law360 (March 19, 2021, 4:17 PM EDT) -- The Harford Mutual Insurance Co. urged a Pennsylvania federal judge on Thursday to throw out claims filed by nearly two dozen hotel operators in the region that say they were owed coverage for financial losses they sustained as a result of pandemic-driven business closures.

The insurer argued in a motion to dismiss that none of the hotels, which are located throughout Delaware, New Jersey, Pennsylvania and Virginia, had sustained the kinds of physical damage their policies were intended to provide coverage for.

"The presence of direct physical loss of or damage to property is a foundational element of property insurance policies," the insurer argued. "In the absence of direct physical loss of or damage to property, there is no coverage."

The hotel operators, which are all affiliated with SSN Hotels, sued in December, claiming they were wrongly denied coverage despite taking out policies intended to provide them coverage in the event of "sudden suspension of operations for reasons outside of its control."

The hotels pointed to policy language that expressly provided for coverage when the actions of "civil authorities" lead to the properties becoming inaccessible.

The complaint said that business closures orders by governors in Delaware, New Jersey, Pennsylvania and Virginia constituted exactly the kind of "civil authority" action contemplated under the policies.

But Harford argued in its motion to dismiss that the cornerstone of its policies was a need that any covered property suffer a tangible physical loss in order for any coverage obligations to be triggered.

"Property insurance cannot be generally applied to situations where the risk is not tied to something that can be repaired or replaced whether it be the insured premises or, as in the case of civil authority coverage, for damage occurring within a mile of the insured premises," the insurer said.

And with no such physical loss at issue in the case of the hotels, the insurer said the case needed to be thrown out.

Policyholders have had little luck so far in convincing judges to credit claims that they're entitled to coverage for virus-related financial losses.

As recently as Thursday, a judge in the Western District of Pennsylvania tossed out a would-be class action from an Altoona-area hospital on grounds that it hadn't suffered any physical damage because of the pandemic.

James Ronca, an attorney with Anapol Weiss representing the hotel operators, admitted on Friday that policyholders were currently losing about 80% of the tidal wave of cases currently making their way through the courts over virus-related insurance coverage.

"There have been any motions to dismiss around the country, and insurance companies have been winning them at about an 80-to-20% clip," he said.

But Ronca remained hopeful that rulings by appellate courts would start setting precedent in favor of insureds.

"What we don't have is we don't have any appellate authority, to my knowledge as of today, and everybody's waiting for that to happen," he said. "These businesses were hurt bad, they were forced to close very abruptly, they thought they had insurance coverage, but then they're told, 'But not for this.'"

A spokesperson for the Hartford did not immediately return a message seeking comment.

Harford is represented by Kevin McNamara of Thomas Thomas & Hafer LLP.

The hotels are represented by Sol Weiss, James Ronca, Stanford Ponson and Paola Pearson of Anapol Weiss.

The case is SSN Hotel Management LLC et al. v. The Harford Mutual Insurance Co., case number 2:20-cv-06228, in the U.S. District Court for the Eastern District of Pennsylvania.

--Additional reporting by Craig Clough. Editing by Adam LoBelia.

Update: This story has been updated with comment from plaintiffs' counsel.

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