Today, in the case of Gilreath Family & Cosmetic Dentistry Inc. v. The Cincinnati Insurance Company, the Eleventh Circuit affirmed the Northern District of Georgia’s dismissal of a plaintiff’s complaint. The Eleventh Circuit becomes just the second federal appellate court to address the merits of a COVID-19 business interruption insurance case after the Eighth Circuit cursorily affirmed the trial court’s dismissal in Oral Surgeons PC. v. The Cincinnati Insurance Company.
In their per curiam, not-for-publication opinion, the Eleventh Circuit rejected the plaintiff’s argument that they should have received coverage under the “Business Income” and “Extra Expense” provisions of their policy. Applying precedent from the Georgia Court of Appeals, the Court held that “direct physical loss or damage” requires that there be “an actual change in insured property that either makes the property unsatisfactory for future use or requires that repairs be made.” (internal quotations omitted). The Court found that the plaintiffs, who own a dental practice in Georgia, had not alleged anything that would qualify as physical loss or damage to their property. Of particular importance, the Court rejected the plaintiff’s argument that the possible presence of viral particles constituted physical damage or loss to the property. For similar reasons, the court also held that the plaintiffs were properly denied coverage under the “Civil Authority” provision.
Of note, the Georgia Court of Appeals decision relied on by the Eleventh Circuit rejected a Y2K claim for business interruption coverage for loss related to the need to change a computer system from a two digit to a four digit date format. AFLAC Inc. v. Chubb & Sons, Inc., 260 Ga. App. 306, 308 (2003).
As of right now, insurers are 2-0 in federal appeals. With many more cases sitting on the dockets of the various circuits, we will have to wait and see if other courts will follow suit.
