‘Physical Loss’ In The Context Of Commercial Property Policies For Covid-19-Related Losses In Pennsylvania

With the onset of the Covid-19 pandemic in 2020, businesses across the country were forced to shut their doors and turn to their commercial property insurance companies to seek coverage.

With their properties having been rendered useless for their intended (and insured) business purposes, these insureds reasonably expected their ‘all risk’ policies would provide the promised ‘business income’ protection due to the ‘physical loss’ of their properties.

The insurance industry, however, near-universally denied coverage, leading to a proliferation of lawsuits around the country -- including in Pennsylvania.

On November 30, 2022 the Pennsylvania Superior Court issued a pair of decisions that ostensibly addressed the same legal question posed in the vast majority of these cases -- whether the term ‘physical loss’ in a commercial property policy can reasonably be construed to mean the loss of use of property for its intended business purpose.

Curiously, the Superior Court’s decisions in Ungarean v. CNA & Valley Forge Insurance Co., Nos. 490 WDA 2021, No. 948 WDA 2021, 2022 Pa. Super. LEXIS 467 (Pa. Super. Ct. Nov. 30, 2022) and MacMiles, LLC v. Erie Insurance Exchange, No. 1100 WDA 2021, 2022 Pa. Super. LEXIS 469 (Pa. Super. Ct. Nov. 30, 2022) reached opposite and seemingly contradictory conclusions, leaving the question far from settled within Pennsylvania.

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