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Law360 (June 1, 2021, 5:34 PM EDT) -- A New Jersey federal judge has tossed a tanning salon's proposed class action for coverage of pandemic losses, saying a virus exclusion in the salon's policy with Nationwide Mutual Insurance Co. precludes any coverage.
Under Beach Glo Tanning Studio's commercial property insurance policy with Nationwide and its subsidiary Scottsdale Insurance Co., the insurers aren't responsible for covering losses resulting from government shutdown orders, U.S. District Judge Brian R. Martinotti found on Friday. The decision adds to the growing number of federal wins for insurers litigating coronavirus coverage battles with their policyholders.
In finding for Nationwide, Judge Martinotti said the virus exclusion language in the salon's policy was unambiguous and wasn't restricted to viruses found to have contaminated an insured property, as Beach Glo had contended. Nationwide could easily have added that to its policy if it had so desired, Judge Martinotti said.
Because shutdown orders issued by New Jersey Gov. Phil Murphy were a response to the virus, Beach Glo could not claim they were a covered cause of loss, Judge Martinotti said. Rather, he said, it was the virus that started the chain of events leading to the orders, making related losses subject to the virus exclusion.
He added that the exclusion did not need to reference a pandemic to be applicable.
Beach Glo first brought its case against Nationwide in October 2020. It sought to lead a national class and a New Jersey subclass of businesses holding "all-risk" commercial property insurance policies with Nationwide and Scottsdale. The salon had claimed that the "sole proximate cause" of its losses were the shutdown orders.
"The so-called 'virus exclusion' is not applicable to this case because [Beach Glo's] and class members' losses were not caused by a 'virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease,'" the salon said.
The virus exclusion in Beach Glo's policy made it irrelevant whether the salon sustained the requisite physical loss or damage for coverage, Judge Martinotti said. The finding comes as policyholders have been having a difficult time convincing federal courts that loss of use of their property entitles them to coverage for subsequent losses.
Nationwide partly denied Beach Glo's claims for coverage on the grounds that the salon didn't experience any physical loss or damage, according to court documents.
With Friday's decision, Beach Glo becomes one of the latest small businesses to have its pandemic coverage suit dismissed in federal court. Over 80% of such suits across the country have been permanently dismissed, according to data compiled by the University of Pennsylvania Carey School of Law. In New Jersey, almost all of the suits involving a policy with a virus exclusion have been dismissed, the data showed.
Counsel for Beach Glo declined to comment on the decision.
Counsel for Nationwide did not immediately respond to a request for comment.
Beach Glo is represented by Kevin P. Roddy and Joshua S. Kincannon of Wilentz Goldman & Spitzer PA, Luke Montgomery and Brad Ponder of Montgomery Ponder LLC and Brian Kinsley of Crumley Roberts.
Nationwide is represented by Mark C. Errico of Squire Patton Boggs LLP.
The case is Beach Glo Tanning Studio Inc. v. Scottsdale Insurance Co. et al., case number 3:20-cv-13901, in U.S. District Court for the District of New Jersey.
--Additional reporting by Jeannie O'Sullivan. Editing by Haylee Pearl.
For a reprint of this article, please contact reprints@law360.com.
