4th Circuit says virus class action should be dismissed

The 4th Circuit U.S. Court of Appeals Friday said a 2022 ruling finding COVID-19 does not cause physical damage could be used to dismiss a class action against State Farm Mutual Insurance Co. over the denial of business loss claims from the pandemic.

A majority of the three-judge panel said in Elegant Massage LLC v. State Farm Mutual Insurance Co. et al. that the court could exercise “pendent jurisdiction” to apply the ruling in Uncork & Create LLC v. Cincinnati Insurance Co. because State Farm’s motion to dismiss was previously denied.  

Virginia Beach, Virginia-based Elegant Massage, which owns and operates Light Stream Spa, filed a class action in federal court in Virginia against State Farm after its claim for losses it incurred after closing in March 2020 was denied. State Farm attempted to have the case dismissed because the business closed before any government closure orders were in place and because there was no physical loss or damage. State Farm also argued that a virus exclusion applied to bar coverage, court records show.

The trial judge denied the motion, finding that under Virginia law the phrase “direct physical loss” is ambiguous and that no exclusion was applicable. The judge also rejected State Farm’s bid for an appeal.

Elegant Massage then filed a motion for class certification, which was granted. State Farm appealed.

The majority said that even though the Uncork ruling dealt with West Virginia law, the decision established that neither government closure orders nor COVID-19 caused covered physical loss or damage.

U.S. Circuit Court Chief Judge James Andrew Wynn concurred with the decision but found the same conclusion could have been reached by only addressing the class certification ruling. He wrote that the certification should be reversed because State Farm’s denial of business loss claims involved a number of individual issues. 

Representatives for the parties did not respond to requests for comment.