State high court overturns pro-policyholder COVID ruling

The Supreme Court of Pennsylvania Thursday overturned an appeals court ruling in favor of a dental office that sued CNA Financial Corp. for COVID-19-related business interruption coverage.

In Timothy A. Ungarean d/b/a Smile Savers Dentistry P.C. v. CNA and Valley Forge Insurance Co., the high court ruled that the dental business, which complied with government shut-down orders during the pandemic, was not owed coverage under its policy because its property had not been damaged.

The court ruled that “for coverage to apply under the CNA Policy, there must be a physical alteration to the subject property as a result of a direct physical loss or damage necessitating repairs, rebuilding, or entirely replacing the property.”

The decision overturns a December 2022 ruling by the Superior Court of Pennsylvania in Harrisburg, which upheld a lower court’s finding of coverage for the policyholder.

In numerous business interruption insurance cases involving pandemic-related claims over the past four years, courts have agreed mainly with insurers that their policies do not provide coverage for income lost due to temporary business closures.