Professional Negligence Law Reporter

A federal district court held that an insurer did not wrongfully deny a dental practice’s claim for COVID-19 pandemic-related losses resulting from business interruptions.

Kessler Dental Associates, a Pennsylvania practice, received commercial property insurance from The Dentists Insurance Co. Its January 2020 policy provided coverage for income loss and civil authority loss, among other things. Specifically, Kessler’s policy provided that the insurer would pay for direct physical loss of or physical damage to covered property. The policy also provided coverage for lost dental practice income incurred after a civil authority prohibited access to the business because of loss or damage to other property located within a mile of the practice. Finally, the policy contained a virus exclusion for any loss or damage resulting from any virus or bacteria.

In March 2020, Pennsylvania Governor Tom Wolf required all non-life-sustaining businesses to close to prevent the spread of COVID-19 and later issued a stay-at-home order. The state’s health department also prohibited all non-emergency dental procedures. As a result of these measures, Kessler Dental closed its office for all non-emergency services.

Kessler Dental then submitted a claim for its lost income during the suspension period. The Dental Insurance Co. denied the claim, finding that Kessler Dental had not satisfied the policy’s dental income or civil authority coverage provisions and that the virus exclusion applied. Kessler filed a complaint against the insurer, seeking a declaratory judgment and alleging breach of contract. The defendant moved to dismiss.

Granting the motion, the district court found that the plaintiff had not established that the policy covered its claim under either the dental income or civil authority provisions. Under the policy’s language, Kessler Dental was covered for direct physical loss of or physical damage to covered property, or for lost income resulting from damage to insured property. Here, the court said, it did not allege that COVID-19 was present on its premises or made the structure unusable—facts that demonstrated covered physical damage. Without physical damage to its business, Kessler Dental’s coverage for dental practice income loss was not triggered under the defendant’s policy, the court thus found.

The court also found that civil authority coverage also was not triggered here. No civil authority had prohibited access to Kessler Dental, the court said, noting that Kessler was permitted to perform emergency procedures. Moreover, the court held, the limitations on Kessler’s business came from government orders, not from damage to or a dangerous physical condition at a nearby premises.

Consequently, the court held that dismissal was warranted based on its finding that Kessler’s policy did not provide coverage for the losses that the dental practice had suffered during the pandemic.

Citation: Kessler Dental Assocs., P.C. v. Dentists Ins. Co., 2020 WL 7181057 (E.D. Pa. Dec. 7, 2020).