By Bill Wichert

Law360 (May 7, 2021, 3:56 PM EDT) -- A New Jersey federal judge on Friday hit pause on a medical facility's lawsuit against a unit of The Hartford over insurance coverage for losses stemming from the coronavirus outbreak, halting the case until the Third Circuit renders a decision on similar issues in more than a dozen consolidated appeals.

In a one-page order issued without explanation, U.S. District Judge Joseph H. Rodriguez granted Ambulatory Care Center PA's unopposed motion to stay the litigation pending the Third Circuit ruling, hitting the brakes on Sentinel Insurance Co.'s bid to toss the complaint via a motion for judgment on the pleadings.

"All case deadlines, including the deadlines associated with the motion for judgment on the pleadings, are stayed pending a decision by the Third Circuit on the consolidated business interruption appeals," Judge Rodriguez said in the order.

The ruling comes about a month after the Third Circuit consolidated the 14 appeals — some of which involve Sentinel affiliate Twin City Fire Insurance Co. — and directed that similar appeals be stayed "until the above-captioned appeals have been resolved or until further order."

Ambulatory Care Center, which runs a facility in Vineland, New Jersey, launched the suit on May 13, 2020, seeking a declaratory judgment that Sentinel must cover the losses the business suffered after Gov. Phil Murphy suspended elective medical and surgical procedures as part of the state's effort to curb the spread of COVID-19.

Five days after Sentinel — part of Hartford Financial Services Group Inc. — moved for a judgment in its favor, the center on April 21 asked the court to stay the matter, arguing that the circuit appeals "would almost assuredly resolve the underlying issues in this case."

"The appeal currently pending before the Third Circuit implicates questions of law (including New Jersey law specifically) on all fours with those contained in defendant's MJOP, and the Third Circuit's ruling will be authoritative in guiding this court's decision," the center argued in its stay motion brief.

"For the parties and this court to expend resources litigating the MJOP without certainty about where the Third Circuit will come down on the very questions presented in the MJOP is antithetical to the goal of ensuring judicial economy," the center added.

Like many pandemic-related coverage battles in New Jersey federal courts, the dispute between the center and Sentinel touches on the applicability of a virus exclusion in the facility's policy.

That provision provides that Sentinel "'will not pay for loss or damage caused directly or indirectly by ... [the presence], growth, proliferation, spread or any activity of ... virus,'" according to the company's April 16 motion brief. The clause further states that "'[s]uch loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss[.],'" the brief said.

Sentinel claimed in the brief that the clause bars coverage for the center in connection with the public health crisis, noting how other Garden State judges have reached the same conclusion in similar cases.

"Indeed, every judge in this district that has considered this virus exclusion or a similar one has concluded it bars coverage — 11 judges in 20 opinions in all. These judges join three New Jersey Superior Court judges who have ruled the same way," Sentinel said. "There is nothing different about this case."

But the center on May 3 countered in an opposition brief that a "reasonable reading" of the language in the exclusion "would not suggest that a pandemic, or civil authority orders issued to combat a pandemic, are excluded."

"The plain language of the policy exclusion, excluding 'fungi, wet rot, dry rot, bacteria, or virus' contemplates scenarios involving temporary contamination of a property, but does not contemplate a worldwide pandemic that results in statewide shutdown orders, which is the allegation here," the center said.

Counsel for the parties did not immediately respond to requests for comment Friday.

Ambulatory Care Center is represented by Richard M. Golomb and Kenneth J. Grunfeld of Golomb & Honik PC, Arnold Levin, Laurence S. Berman, Frederick Longer, Daniel Levin and Michael M. Weinkowitz of Levin Sedran & Berman LLP, W. Daniel "Dee" Miles III, Rachel N. Boyd and Paul W. Evans of Beasley Allen Crow Methvin Portis & Miles PC and John E. Toczydlowski of The Reiff Law Firm.

Sentinel is represented by James L. Brochin and Sarah D. Gordon of Steptoe & Johnson LLP.

The case is Ambulatory Care Center PA v. Sentinel Insurance Co. Ltd., case number 1:20-cv-05837, in the U.S. District Court for the District of New Jersey.

--Editing by Daniel King.

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