U.S. District Judge Yvette Kane granted American Select Insurance Co.'s dismissal motion, siding with the insurer that the owners of the Comfort Suites Hummelstown failed to prove either COVID-19 or government closure orders touched any physical conditions of their property.
"Plaintiff's allegations simply do not support its claim that the COVID-19 pandemic and resulting governmental orders caused 'direct physical loss of or damage to' the covered property," the judge said.
The hotel owners showed that the pandemic and the orders caused the hotel to lose visitors, but the owners could not demonstrate property damage as required by the policy, she said. The Harrisburg, Pa. based Comfort Suites was never ordered closed because hotels were excluded from government closure orders and were permitted to open, Judge Kane said.
In December, the hotel owners asked the court to declare losses from pandemic measures ordered by Gov. Tom Wolf to be covered by the contract signed with Westfield Insurance Co. and its parent, American Select, as well as allow compensatory damages from a breach of contract.
The hotel argued that the virus exclusion clause applies to damages when a property is subject to actual contamination or outbreak. Damages suffered by the Comfort Suites Hummelstown occurred from social distancing and capacity guidelines enacted by the government in spring 2020, it says in the complaint.
In February, American Select urged the court to toss the suit, arguing that the hotel suffered economic losses not covered under its commercial property policy. The carrier said that the policy's virus exclusion bars coverage and neither COVID-19 nor the government orders altered the components of the building.
On Monday, Judge Kane said the hotel owners failed to allege a direct physical loss because they couldn't demonstrate how their properties lost function. And because the hotel never lost access to its properties, the owners are not entitled to civil authority coverage, she added.
"Plaintiff's allegations of the risks, stigma, and ubiquity of COVID-19 bear no relation to the structure of the covered property and in no way suggest that the hotel became wholly defunct or was otherwise reduced to uselessness or uninhabitability," the judge said.
Although the hotel owners said the nature of its hotel's indoor space makes it particularly vulnerable to the risk of COVID-19, it did not show any contamination or specific impact of the virus on the property apart from the general influence of the pandemic, Judge Kane said.
Even if the owners were able to prove that the coronavirus physically damaged the property, the policy's virus exclusion unambiguously bars all COVID-19 related losses, she added.
Counsel for the parties could not be immediately reached for comment Monday
The hotel is represented by Sol H. Weiss, James R. Ronca, Gregory S. Spizer and Paola Pearson of Anapol Weiss.
American Select is represented by Edward M. Koch and Marc Penchansky of White and Williams LLP.
The case is 44 Hummelstown Associates LLC v. Westfield Insurance Co. et al., case number 1:20-cv-02319, in the U.S. District Court for the Middle District of Pennsylvania.
--Editing by Gemma Horowitz
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