As dental attorneys, we want to ensure our clients explore all options for financial relief during the COVID-19 pandemic. The economic effects of COVID-19 have been widespread, affecting all businesses in some way. Dental practices have been especially hard-hit. Faced with the risk of spreading COVID-19 to both patients and employees, government orders forced dental practices to cancel scheduled dental services and close their doors. This “business interruption” has caused a significant loss of income for all dental practices. At this point, it is unclear whether some dental practices may be able to receive some financial relief from their existing business insurance coverage.
Typically, most business owners’ insurance policies contain business interruption insurance. Business interruption insurance provides coverage that protects a business in the event of a profit loss that is caused by a covered event. If the business suffers a loss of profits due to a covered event, the insurance company will pay the business a specified amount of money to replace the lost profits.
The definition of a “covered event” varies from policy to policy. Covered events can range from theft, fire, wind, falling objects, lightning, hurricanes, tornadoes, and other natural disasters. Also, policies sometimes list specific events that are excluded as covered events under the policy. As the COVID-19 pandemic is a new situation with no historical comparison, it is unclear if the COVID-19 pandemic will be considered a natural disaster or another covered event under some policies. Many insurance companies have denied recent claims for payments under business interruption policies related to losses caused by COVID-19. These denials have started a wave of lawsuits in which courts are asked to decide whether or not the COVID-19 pandemic is a covered event under business interruption insurance policies.
A recent decision from the Pennsylvania Supreme Court has indicated that the COVID-19 pandemic is a “natural disaster” under Pennsylvania law. In Friends of DeVito v. Wolf, No. 68 MM 2020, the Supreme Court found that the COVID-19 pandemic falls within the Pennsylvania Emergency Code’s definition of a natural disaster. Natural disaster includes any “other catastrophe which results in substantial damage to property, hardship, suffering or possible loss of life.” The decision did not specifically address the definition within the context of a business interruption insurance claim. However, it could potentially be used for future challenges regarding claim denials in Pennsylvania.
On the federal level, over 100 cases have been filed by plaintiffs seeking to utilize their business interruption insurance coverage and receive insurance payments for losses caused by the COVID-19 pandemic. Recently, plaintiffs in the United States District Courts for the Eastern District of Pennsylvania and the Northern District of Illinois have filed separate motions requesting consolidation and centralization of all federal cases related to business interruption insurance claims stemming from COVID-19 into multidistrict litigation. In the matter In re: COVID-19 Business Interruption Protection Insurance Litigation, Dkt. No. MDL-2942 (COVID-19 MDL), ECF No. 156, the Judicial Panel on Multidistrict Litigation will decide if the cases involve one or more common questions of fact and should be consolidated for efficiency. If the Panel decides to consolidate the cases into a multidistrict litigation, the resulting litigation could provide a single federal decision regarding the handling of the COVID-19 pandemic under business interruption insurance coverage.
Dental practices will want to review their business owner’s insurance policies to determine if their policies include business interruption coverage, as well as any exclusions to the coverage. A dental practice’s claim for business interruption coverage will be handled according to the terms of the practice’s unique policy. It is important to work with an attorney who can provide advice regarding the terms of a specific policy, and can narrowly draft a business interruption claim to fit the terms of the policy. This will ensure the business interruption claim has the best chance to be approved by the insurance company, or alternatively, upheld and approved by the court. Finally, if there is any potential of recovery, each dental practice should file a claim. If not, you may lose the opportunity to file a claim because of the amount of time that has passed. Again, it is important to discuss this with someone that has specific knowledge regarding your dental practice and specific knowledge regarding insurance.