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With the onset of the Covid-19 pandemic in 2020, businesses across the country were forced to shut their doors and turn to their commercial property insurance companies to seek coverage. With their properties having been rendered useless for their intended (and insured) business purposes, these insureds reasonably expected their “all risk” policies would provide the promised “business income” protection due to the “physical loss” of their properties. The insurance industry, however, near-universally denied coverage, leading to a proliferation of lawsuits around the country – including in Pennsylvania. 

On November 30, 2022 the Pennsylvania Superior Court issued a pair of decisions that ostensibly addressed the same legal question posed in the vast majority of these cases – whether the term “physical loss” in a commercial property policy can reasonably be construed to mean the loss of use of property for its intended business purpose. Curiously, the Superior Court’s decisions in Ungarean v. CNA & Valley Forge Insurance Co., Nos. 490 WDA 2021, No. 948 WDA 2021, 2022 Pa. Super. LEXIS 467 (Pa. Super. Ct. Nov. 30, 2022) and MacMiles, LLC v. Erie Insurance Exchange, No. 1100 WDA 2021, 2022 Pa. Super. LEXIS 469 (Pa. Super. Ct. Nov. 30, 2022) reached opposite and seemingly contradictory conclusions, leaving the question far from settled within Pennsylvania.Continue Reading A tale of two opinions: The meaning of “physical loss” in the context of commercial property policies for Covid-19-related losses in Pennsylvania

As a recent decision from the Eleventh Circuit highlights, when purchasing insurance for workplace bodily injuries, policyholders need to be mindful of how all of their policies fit together, keeping an eye out for policy language that insurers may exploit to manufacture unexpected and unintended gaps in coverage.

Covering the workplace

Typically, employers seek three types of coverage to manage liabilities arising from accidents in the workplace: workers’ compensation coverage, employer’s liability coverage, and comprehensive general liability (“CGL”) coverage. These three types of policies are designed to work together, with workers’ compensation coverage providing protection against most bodily injury claims sustained by employees while working; CGL coverage providing protection against most bodily injury claims asserted by third parties; and employer’s liability coverage filling in any coverage gaps for bodily injury claims brought by employees. To avoid duplicative coverage, employer’s liability policies typically include a workers’ compensation exclusion and CGL policies typically include both a workers’ compensation exclusion and an employer’s liability exclusion.

The intent of these coverages (and exclusions) is to meet the twin goals of ensuring seamless coverage to the employer without having to pay for needless overlapping of coverage. As one treatise explains:

The intent of the employment exclusion [in a CGL policy] appears to be to avoid duplication of coverage provided under Workers’ Compensation and Employers Liability policies.  Accordingly, any interpretation of the commercial general liability exclusion that bars coverage for claims not covered under a Workers’ Compensation and Employers Liability policy would appear to deny coverage erroneously and to create a gap in coverage that almost surely was not intended by the policyholder.

See 21-132 Appleman on Insurance Law & Practice Archive § 132.5 (2nd 2011).

Unfortunately, such intentions may not always align with its insurer’s resolve to avoid paying claims. Just last month, the Eleventh Circuit rejected an insurer’s attempt to improperly expand the scope of a CGL policy’s employer’s liability exclusion. That decision provides helpful ammunition for policyholders to resist similar efforts, and serves as a useful reminder to avoid complacency and watch out for potential ambiguities when purchasing coverage.Continue Reading “Mind the gap”: Guarding against unintended gaps in coverages