By Jeff Sistrunk

Law360 (January 6, 2021, 9:02 PM EST) -- A Georgia federal judge on Tuesday ruled that Owners Insurance Co. is not obligated to cover an Atlanta-area hair salon's losses amid the COVID-19 pandemic, following a host of courts in finding that the salon's claim is not viable because it did not allege it sustained a requisite "physical loss of or damage to" its property.

Chief U.S. District Judge Thomas W. Thrash Jr. granted Owners' motion to dismiss the suit brought by KD Unlimited Inc., which operates The Artisan Gathering Salon in the Atlanta suburb of Lawrenceville.

In its suit, filed May 20, Artisan sought coverage from Owners for significant financial losses it has suffered due to local and statewide COVID-19 stay-at-home orders. The salon was forced to shutter entirely from late March to May 1, after which it was permitted to reopen at reduced capacity, according to court documents.

But the "business income and extra expense" section of Artisan's policy extends coverage only for losses stemming from the direct physical loss of or damage to the salon's property, and Judge Thrash said he was persuaded by a slew of decisions around the country that have found this key phrase requires actual, tangible damage. Here, Artisan asserted only that its property experienced a "physical impact" due to the likely presence of the novel coronavirus, although the virus is not "detectable other than through microscopic means and occurrence of illness," according to court documents.

However, Judge Thrash held that this vague allegation is insufficient to meet the Owners policy's threshold of physical loss or damage requirement, pointing out that Artisan did not claim in its suit that the coronavirus was ever detected on its premises. And even if an individual infected with the virus had been present at the salon at some point, the district judge said that alone would not fulfill the requirement, either, opining that "routine cleaning performed with greater frequency and care eliminates the virus on surfaces."

"The plaintiff merely claims that the orders closed the salon, and it was likely that the coronavirus was present in or around the property at some point," Judge Thrash wrote. "But the loss must arise to actual damage, and it is not plausible how government orders meet that threshold when the salon merely suffered economic losses, not anything tangible, actual or physical."

Unlike many similar property policies, Artisan's does not contain a separate "civil authority" provision providing coverage for losses resulting from the policyholder's inability to access its premises due to a government order issued in response to damage at a nearby property, according to Judge Thrash's order.

The order was only the third ruling to date addressing a COVID-19 business interruption claim under Georgia law, and all three cut in favor of the insurer. Judge Thrash himself issued the first such decision under the Peach State's law, ruling in early October that Allied Insurance Co. of America does not have to cover Cajun Henry's Louisiana Grill's pandemic-related losses — a determination the restaurant swiftly appealed to the Eleventh Circuit. And on Monday, U.S. District Judge Steven D. Grimberg dismissed a putative class action filed by several dental practices insured by units of The Hartford.

Overall, as of Wednesday, state and federal courts have issued more than 130 decisions on motions to dismiss or summary judgment filed in COVID-19 business interruption cases, according to a database maintained by the University of Pennsylvania's Carey Law School. Of those, just over 100 have resulted in the dismissal of policyholders' complaints. In 22 cases, policyholders have survived dismissal motions, and two policyholders have won outright summary judgment rulings obligating insurers to pay their pandemic-related losses, UPenn found.

Counsel for Artisan and Owners did not immediately respond to requests for comment Wednesday afternoon.

Artisan is represented by Anthony C. Lake of Gillen Withers & Lake LLC, Daniel C. Levin, Arnold Levin, Laurence Berman and Frederick Longer of Levin Sedran & Berman LLP, Richard M. Golomb and Kenneth J. Grunfeld of Golomb & Honik PC, Aaron Rihn of Robert Peirce & Associates and W. Daniel "Dee" Miles III, Rachel N. Boyd and Paul W. Evans of Beasley Allen Crow Methvin Portis & Miles PC.

Owners is represented by Bret A. Beldt, Forrest S. Latta and Taylor B. Johnson of Burr & Forman LLP.

The case is KD Unlimited Inc. v. Owners Insurance Co., case number 1:20-cv-02163, in the U.S. District Court for the Northern District of Georgia.

--Editing by Janice Carter Brown.

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