Canadian Lawyer

28 www.canadianlawyermag.com LEGAL REPORT U.S. INSURANCE CASES ON COVID-19 AND 'PHYSICAL DAMAGE' loss or damage," which the court considered broader than "direct physical loss." The court concluded that policy included coverage for loss of physical use of the plaintiff 's stores and physical premises. In P.F. Chang's China Bistro Inc. v. Certain Underwriters at Lloyd's of London (February 2021), the California Superior Court denied the insurer's motion for judgment on the pleadings. Lloyd's argued that the corona- virus does not cause "direct physical loss of or damage to property." The court held that a broad interpretation of "any physical loss of … property" includes the inability to access or use all or a portion of the physical premises. Forsythe acknowledges that the number of U.S. cases where the insurers could not have the case dismissed is small. And one of the first appeal-level rulings — Oral Surgeons P.c. v. Cincinnati Insurance Co. in the Eighth Circuit of the Federal Court — may be more in line with how she expects Canadian courts will decide. In that case, the court held that the lost business income and some extra expense sustained from the COVID-19 pandemic and the related government-imposed restrictions did not constitute direct "accidental physical loss or accidental physical damage" under the plaintiff 's policy. The Eighth Circuit confirmed the policy required direct "physical loss" or "physical damage" to trigger business interruption and extra expense coverage and ruled "there must be some physicality to the loss or damage of property." Still, it may be a high hurdle to cross, but several COVID-related class-action suits have been filed in Canada, along with dozens of individual lawsuits. Doug Stewart, a partner with Dentons Canada LLP, says it has become a hot-button issue, and "no one really knows" how courts will deal with the COVID-related cases. The MDS decisions may deal with different non-COVID circumstances, "but obviously, it's relevant." In Ontario, the various COVID-19 coverage class actions are being case managed by one judge. To date, three class actions involve Aviva, and one other is against 14 different insurers. The plaintiffs allege that Aviva's policy wording specifically offers coverage for business income loss caused by restricted access to the property because of government orders related to an outbreak of a contagious disease. Aviva denies these coverages are meant to respond to an international pandemic. The claims against Aviva were carved out of the larger "omnibus" action to allow the more focused claims aimed only at Aviva to proceed faster. The Ontario case manage- ment judge has referred to the certification stage for these claims as "plain vanilla certi- fication," with the difficult coverage issues to be argued on their merits later. Forsythe says there are various class actions filed against insurers for business interruption in B.C. as well. The majority of the defendants in those claims are also defen- dants in the Ontario omnibus action. The various plaintiff groups are cooperating and have agreed to proceed in Ontario first, with the agreement of those overlapping defen- dants. As a result, the B.C. class actions, while in case management, are relatively dormant at this stage. In the Quebec-based case Centre dentaire Boulevard Galeries d'Anjou inc. c. L'Unique assurances générales inc., the Superior Court of Quebec, allowed the application for autho- rization to bring a class action against the insurer. The judge noted the policy did not include the concept of "direct damage" and concluded the policy wording was broad and contained ambiguities that required more detailed analysis. While it doesn't deal with COVID-19 specifically, the MDS case has significance because the Ontario Superior Court deci- sion appears to be the first case in Canada to suggest that, in the context of an all-risk property policy, resulting physical property damage can include loss of use. However, given the success of the appeal in overturning that decision, its relevance has been muted. And even if it had withstood the appeal, Ross Stores, inc. v. Zurich Am. Ins. Co. (July 2021): California Superior Court denied a motion to dismiss the plaintiffs' claims for business interruption coverage. It concluded that the policy included coverage for loss of physical use of the plaintiff's stores and physical premises. P.F. Chang's China Bistro Inc. v. Certain Underwriters at Lloyd's of London (February 2021): California Superior Court held that a broad interpretation of "any physical loss of … property" includes the inability to access or use all or a portion of the physical premises. SWB Yankees LLC v. CNA Fin. Corp., (August 2021): Pennsylvania State Court judge rejected the insurers' arguments that the plaintiff failed to allege "direct physical loss or damage" sufficient to trigger coverage for its COVID-19 business interruption losses. Oral Surgeons P.c. v. Cincinnati Insurance Co.: Eighth Circuit of the Federal Court held that the policy required direct "physical loss" or "physical damage" to trigger business interruption coverage, ruling "there must be some physicality to the loss or damage of property." INSURANCE

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