Case Bulletin – 1 S.A.N.T. Inc. vs. Berkshire Hathaway, Inc. and National Fire & Marine Insurance Co.
On January 15, 2021, U.S. District Judge William S. Stickman IV dismissed a Pennsylvania restaurant’s proposed class action seeking coverage from its insurance company for losses due to the coronavirus. The court found that establishments that were limited to carry-out service during the pandemic had not sustained the “direct, physical loss” that is necessary to trigger their insurance policies.
1 S.A.N.T. Inc. operates Town & Country Bar & Grill and Gatherings Banquet and Event Center in New Castle, PA. 1 S.A.N.T. Inc. lost business income due to the suspension or reduction of its business operations because of Governor Tom Wolf’s Executive Order closing all non-life sustaining businesses. As such, 1 S.A.N.T. Inc. brought a class action lawsuit seeking coverage for lost business income from its commercial property insurance company, National Fire & Marine Insurance Co. Nation Fire denied the insurance claim, because 1) 1 S.A.N.T. Inc. did not sustain “direct physical loss of or damage to” covered property necessary to trigger coverage under the policy, 2) 1 S.A.N.T. Inc.’s claim was barred by the Virus Exclusion provision in the policy because the alleged loss was caused by Covid-19, and 3) the Covid-19 orders issued by governmental authorities did not prohibit access to 1 S.A.N.T. Inc.’s property, which was required to trigger coverage.
The court agreed that National Fire’s denial of the claim was proper, as “the policy’s language presupposes that the request for coverage stems from an actual impact to the property’s structure, rather than the diminution of its economic value because of governmental actions that do not affect the structure.” 1 S.A.N.T. Inc. argued that the virus exclusion in it policy was invalid because when having the language approved by state regulators, insurance companies misrepresented its applicability to pandemic situations. The court did not address this issue however, because it found that there was no coverage that the exclusion could apply to. Further, the restaurant was able to remain partially open for takeout operations under the Covid-19 orders, and it did not allege that its facilities were contaminated or that anyone in the restaurant had gotten sick. As such, the restrictions were not enough to be considered a “civil authority” that would trigger coverage, and the ubiquitous presence of the virus could not broaden the policy definitions. Therefore, the court granted National Fire’s Motion to Dismiss.