In an opinion made available Thursday, U.S. District Judge Renée Marie Bumb approved Sentinel Insurance Co.'s bid to dismiss the firm's lawsuit over the insurer's refusal to cover its losses following government restrictions aimed at curbing the spread of COVID-19 in New Jersey, Pennsylvania, Delaware, Maryland and New York.
Adding to a growing line of similar decisions over such pandemic-related coverage, Judge Bumb on Wednesday found that Stern & Eisenberg's claims fell short because of a virus exclusion prohibiting coverage for "'loss or damage caused directly or indirectly by ... [the p]resence, growth, proliferation, spread or any activity of ... virus.'"
The provision is "unambiguous" and thus "precludes plaintiff from coverage where the alleged losses were caused by a virus," the judge said.
"Any losses that plaintiff allegedly suffered were caused either by COVID-19 itself (a virus) or by the executive orders and declarations that forced plaintiff to suspend its operations," Judge Bumb said. "This court notes that those orders and declarations were themselves caused by the virus."
Among its arguments in opposition to Sentinel's dismissal motion, Stern & Eisenberg claimed in an opposition brief that "it would not be appropriate for the court to take judicial notice of the fact that COVID-19 is a virus."
"While plaintiff is aware of wide-spread media reports stating that COVID-19 is a virus, plaintiff is unaware of any court that has considered the admissibility of the scientific evidence supporting such reports," the brief states. "COVID-19 is novel and the scientific evidence, rumors, and speculation surrounding COVID-19 have been in a constant state of evolution."
As an example, the firm noted that former President Donald Trump is "reported as stating, '[l]ooks like by April, you know in theory when it gets a little warmer, it miraculously goes away' and 'It's going to disappear. One day, it's like a miracle, it will disappear.'"
"Such statements contradict the wide-spread media reports," the firm said in its brief.
The judge briefly dispensed with that argument in a footnote in her opinion, citing the following statement from the U.S. Centers for Disease Control and Prevention website: "COVID-19 is a new disease, caused by a novel (or new) coronavirus that has not previously been seen in humans. Because it is a new virus, scientists are learning more each day."
The policy from Sentinel — which is part of Hartford Financial Services Group Inc. — covered the firm's offices across the five states from Nov. 1, 2019 to Nov. 1, 2020, according to its July 21 state court complaint. Sentinel later removed the action to federal court.
Due to virus-related government orders in each state, Stern & Eisenberg "suffered a direct physical loss of and damage to its property because it has been unable to use its property for its intended purpose," the complaint said. The firm submitted a claim for coverage of its losses in March 2020 and Sentinel denied it about three months later, court documents state.
The insurance company later cited the virus exclusion in seeking to ax the complaint, but the firm argued in part that the clause is ambiguous. On that point, the firm claimed in its brief that "the grouping of wet rot and dry rot together with virus and bacteria suggests that the exclusion is only intended to apply when a virus is physically present at the property."
Stern & Eisenberg said "discovery is needed to ascertain the true intent and scope of the virus exclusion at issue here."
But Judge Bumb said that argument was "recently rejected by several courts in this District analyzing the same virus exclusion."
The judge cited in particular U.S. District Judge Kevin McNulty's Feb. 8 opinion tossing a proposed class action against Twin City Fire Insurance Co. from an eye care practice challenging the insurer's refusal to cover its pandemic-related losses.
"In that case, the court stated that 'there is no textual limitation indicating that the virus must be present at the property. Rather, the clause excludes coverage for losses caused by the spread of viruses generally, and adds that it extends to both direct and indirect causation,'" Judge Bumb said.
Stern & Eisenberg "offers no compelling argument that the plain language of the virus exclusion is susceptible to two reasonable interpretations," the judge added.
"Rather, the language is explicit and plainly excludes from coverage any loss 'caused directly or indirectly by ... [the p]resence, growth, proliferation, spread or any activity of ... virus,'" the judge said.
Counsel for the parties did not immediately respond to requests for comment Thursday.
Stern & Eisenberg is represented by Robert W. Williams and Ashley Soble Nechemia of Mattleman Weinroth & Miller PC.
Sentinel is represented by James L. Brochin and Sarah D. Gordon of Steptoe & Johnson LLP.
The case is Stern & Eisenberg PC v. Sentinel Insurance Co. Ltd., case number 1:20-cv-11277, in the U.S. District Court for the District of New Jersey.
--Editing by Amy Rowe.
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