By Shawn Rice

Law360 (May 27, 2021, 3:11 PM EDT) -- The owners of several Buick auto dealerships in Pennsylvania had their business interruption suit come to a screeching halt when a federal judge said government closure orders tied to the COVID-19 pandemic didn't cause any physical loss or damage to the locations.

U.S. District Judge Joseph F. Leeson Jr. on Wednesday ruled Sentry Insurance Group doesn't have to cover the losses associated with Star Buick GMC and affiliates' having to shut down during the pandemic.

"The instant claims are not unfamiliar in recent months," Judge Leeson said. "This court agrees with the almost unanimous decisions in this district that the all-risks policy at issue does not provide coverage for the business income losses Star Buick sustained while its operations were suspended."

Star Buick's car dealerships throughout Pennsylvania were forced to close down under government orders, according to the suit, which impacted its sales. The dealers alleged Sentry's all-risk policy covers the losses under its business income and civil authority provisions. Sentry disagreed, asking for dismissal.

In Wednesday's ruling, Judge Leeson dismissed the suit with prejudice, finding the inability to use the car dealerships wasn't tied to a "physical condition actually impacting the property." And the coronavirus that causes the illness COVID-19 can't be a reason for a physical loss, the judge said, as the dealers don't allege the virus was present.

"Although it was the orders, not the pandemic, that caused Star Buick to suspend operations, as further evidenced by the fact that the 'pandemic' was declared more than a week before Star Buick closed its doors to customers, they too did not physically make the property either uninhabitable or unusable," the judge said.

Judge Leeson held the civil authority coverage wasn't triggered as there wasn't any damage to the property surrounding the car dealerships. Even if there was, the judge said the government orders were issued to curb the spread of the pandemic, not "in response to dangerous physical conditions."

Last, Judge Leeson drew attention to the policy's virus exclusion as a different reason coverage wouldn't be extended to the car dealers' losses. The coronavirus falls within the exclusion, the judge said.

Pennsylvania has been one of the more active states involving business interruption suits over pandemic-related losses with a total of 42 rulings in both federal and state courts, according to data from the University of Pennsylvania's COVID Coverage Litigation Tracker. The month of May saw mixed results.

This week, an Allegheny County Court of Common Pleas judge ruled a Pittsburgh tavern was covered under one provision of its policy for the loss of use of property during the COVID-19 pandemic. That judge bucked the trend, finding there didn't have to be physical damage for there to be a loss.

This month, a Pennsylvania federal judge allowed a California furniture business to proceed with its suit, finding ambiguity on the meaning of "direct physical loss or damage." The judge called the furniture store's policy "a labyrinth of pages, paragraphs and pronouncements."

However, Pennsylvania federal judges ruled in favor of insurers in suits brought by a Quakertown hair salon, Philadelphia's largest vending machine business and a Philly fashion boutique.

Representatives for the dealers and Sentry didn't immediately respond to requests for comment Thursday.

The auto dealerships are represented by Christopher M. Reid and Isaac A. Hof of Hof & Reid LLC.

Sentry is represented by Steven J. Schildt and Bryan Shay of Post & Schell PC and Heidi L. Vogt and Janet E. Cain of von Briesen & Roper SC.

The case is Star Buick GMC et al. v. Sentry Insurance Group, case number 5:20-cv-03023, in the U.S. District Court for the Eastern District of Pennsylvania.

--Additional reporting by Hannah Albarazi, Matthew Santoni, Eli Flesch and Daphne Zhang. Editing by Vincent Sherry. 

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