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11th Circuit Affirms Dismissal of COVID-19 Business Interruption Claim

11th Circuit Affirms Dismissal of COVID-19 Business Interruption Claim
By Centers for Better Insurance • Issue #59 • View online
Federal appeals court makes short work of dental practice’s claim for COVID-19 business interruption insurance under Georgia law.

During the Spring of 2020, the Governor of Georgia ordered residents and visitors to “shelter in place” where they lived. People could leave their homes to attend to essential services, including necessary medical care. The Centers for Disease Control (CDC) issued guidance around that time that healthcare providers, including dentists, should postpone elective and non-emergency procedures.
Gilreath Family & Cosmetic Dentistry followed the CDC’s guidance. While the dental practice continued to use its offices to perform emergency procedures, its revenue during the period of the shelter-in-place order dropped significantly.
The dental practice filed a claim with its insurer for this loss of business income. The insurer denied the claim on the basis that the dental practice’s business interruption had not been caused by “physical loss or damage.”
In an opinion issued August 31, 2021, the 11th Circuit Court readily agreed that the dental practice had failed to advance a valid claim for business interruption coverage. The Court relied on a 2003 state intermediate appeals court opinion concluding that the common meaning of “direct physical loss or damage” in an insurance policy is “that there must be ‘an actual change in insured property’ that either makes the property ‘unsatisfactory for future use’ or requires ‘that repairs be made’.”
Turning to the facts of this case, the Court concluded “the shelter-in-place order that Gilreath cites did not damage or change the property in a way that required its repair or precluded its future use for dental procedures.” The court quickly rejected any suggestion that lingering “[COVID-19] particles would cause physical damage or loss to the property.”
The Court took three steps making this opinion unlikely to serve as persuasive precedent in other courts. Most importantly, the 11th Circuit ordered the opinion to remain “unpublished” meaning it will not appear in the formal reporters. Second, the court never heard oral argument from the parties. Finally, the opinion was unsigned by any of the individual judges.
The Court clearly did not regard this as a close case. On the law, the Court saw the meaning of “direct physical loss or damage” as settled in Georgia through the earlier state appeals court decision. On the facts, the Court pointed to the continued use of the dental office for emergency procedures.
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