Law360 (March 19, 2021, 6:10 PM EDT) -- A Hartford unit shouldn't have to cover a New York dental office's more than $150,000 in business interruption losses caused by the coronavirus pandemic and government shutdown orders, a New York magistrate judge said Thursday.
Sharde Harvey DDS PLLC's suit should be dismissed with prejudice, U.S. Magistrate Judge Robert W. Lehrburger recommended, because the loss of use of the dental office for a short time wasn't a covered "direct physical loss or damage" to property under Sentinel Insurance Company Ltd.'s policy.
The judge cited a state Appellate Division panel's 2002 decision in Roundabout Theatre Co. v. Continental Casualty Co., which held there is a need for physical damage to property, not just a loss of use.
"From Roundabout Theater to the current COVID-19 cases, courts have also noted that provisions related to the business income provision further support the proposition that 'direct physical loss of or physical damage to property' requires injury to the property," Judge Lehrburger said.
The Roundabout case is also being cited in other COVID-19 insurance litigation in New York, court records show. Those courts have ruled policies like Sentinel's aren't triggered until there is physical damage to covered property.
Sharde Harvey sued Sentinel, alleging it paid to clean and sanitize the damage to its property caused by the presence of the coronavirus. The dental office said it was only temporarily closed before resuming regular procedures three months after the state government's initial shutdown order.
In Thursday's report, Judge Lehrburger found the claims should be dismissed. While Sharde Harvey couldn't use its property for a time, according to the report, neither the COVID-19 pandemic nor the government shutdown orders caused "physical damage to property."
"Sharde Harvey has not alleged that it was ever completely denied access to its premises. The government shutdown orders at issue contain no such prohibition. Sharde Harvey thus has not plausibly pleaded that it was denied access to its premises," he said, finding the dental office shouldn't be owed civil authority coverage.
And, any contamination on surfaces by the coronavirus didn't cause a "direct physical loss," the judge said, because the virus' presence could be easily eliminated by routine cleaning and sanitization.
Judge Lehrburger isn't the only New York federal judge relying on Roundabout Theatre in a business interruption suit over a policyholder's losses from the pandemic and shutdown orders.
U.S. District Judge John Koeltl earlier in March cited the Broadway theater decision in tossing a catering company's proposed class action for pandemic-related business interruption losses. And, U.S. District Judge Lorna G. Schofield had used Roundabout Theatre back in December to save Sentinel from another similar suit brought by a Manhattan art gallery and dealer's financial losses from the pandemic.
Representatives for both parties didn't respond to requests for comment.
Sharde Harvey is represented by Arnold Levin, Laurence S. Berman, Frederick Longer, Daniel Levin and Michael Weinkowitz of Levin Sedran & Berman LLP, Richard M. Golomb and Kenneth J. Grunfeld of Golomb & Honik PC and W. Daniel Miles III, Rachel N. Boyd and Paul W. Evans of Beasley Allen Crow Methvin Portis & Miles PC.
Sentinel is represented by Sarah D. Gordon, Charles Michael and Meghan Newcomer of Steptoe & Johnson LLP.
The case is Sharde Harvey DDS PLLC v. Sentinel Insurance Company Ltd., case number 1:20-cv-03350, in the U.S. District Court for the Southern District of New York.
--Additional reporting by Melissa Angell and Jeff Sistrunk. Editing by Amy Rowe.
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