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Law360 (January 26, 2021, 7:52 PM EST) -- Two companies running Goddard School daycare centers in Pennsylvania filed separate lawsuits against Philadelphia Indemnity Insurance Co., seeking to compel the insurer to pay for their business losses resulting from COVID-19 and government closure orders.
In a pair of suits filed in state court on Monday, Investment Group LLC and Tiny Happy People Inc. said that their all-risk policies cover all catastrophes, including the ongoing pandemic, and that the policy's virus exclusion was "fraudulently adopted."
Investment Group, which operates the Goddard School in Huntingdon Valley, said it bought the policy from Philadelphia Indemnity in May, with the expectation that it would cover business interruption caused by COVID-19. Tiny Happy People, owner of the preschool in Collegeville, said it had the same expectation when it purchased the policy in December 2019.
Philadelphia Indemnity never informed them that the policy's virus exclusion would apply to bar coverage of a pandemic during and after the purchasing process, the companies said.
The owners said they were forced to shut down last March. They later reopened, but employees of Investment Group's Goddard center tested positive for the virus in November. The school was then asked by the government to quarantine all children and staff, and parents subsequently requested tuition reimbursement and withdrew their children from the school.
According to the suits, Philadelphia Indemnity rejected the schools' insurance claims, stating that they did not incur physical loss or damage, and asserted the virus exclusion. The carrier also claimed that the policies' communicable disease coverages were not triggered.
The virus exclusion was developed by the Insurance Services Office in response to the SARS outbreak, which was not a pandemic like COVID-19, the preschool owners said. The two companies said that they are planning to serve subpoenas on the ISO and insurance regulators regarding the development and proper application of the virus exclusion.
The virus exclusion was intended to cover "infection and contamination by a virus," not direct physical loss or damage caused by a pandemic, the Investment Group and Tiny Happy people argued.
The two preschool owners are seeking a declaration that the virus exclusion does not apply and that their losses are covered under their policies, and demanding damages to be determined in a jury trial.
"This loss is physical. Instead of being able to operate plaintiff's business normally, the insured property was required to physically alter and drastically reduce operations," the companies said. "To do anything else would lead to the emergence or re-emergence of COVID-19 at the location."
Representatives for the parties could not be immediately reached for comment on Tuesday.
The companies are represented by Arnold Levin, Laurence S. Berman, Frederick Longer and Daniel Levin of Levin Sedran & Berman LLP; as well as Richard M. Golomb and Kenneth J. Grunfeld of Golomb & Honik, P.C.
Counsel information for Philadelphia Indemnity was not immediately available.
The cases are Investment Group LLC v. Philadelphia Indemnity Insurance Co., case number 210101556, and Happy Tiny People Inc. v. Philadelphia Indemnity Insurance Co., case number 210101551, in the Court of Common Pleas of Philadelphia County, Pennsylvania.
--Editing by Regan Estes.
For a reprint of this article, please contact reprints@law360.com.
