The Federal Court of Tenn. Dismisses Another COVID Coverage Lawsuit

Another federal court has dismissed a lawsuit against the COVID-19 virus brought by a company whose business interruption claim was denied by its insurer.

In Agilitas USA v Hartford Fire Insurance Co., the US District Court in Middle Tennessee found that the insurance policy contained a virus exclusion. This barred payment for the physiotherapy business’s lost revenue, which was forced when the Tennessee governor shut down non-essential businesses at the start of the pandemic.

Agilitas, doing business as Results Physiotherapy, had argued that Hartford’s denial was inappropriate because the loss of income was not the result of the coronavirus, but was due to the governor’s arrest order.

U.S. District Judge Aleta Trauger didn’t believe it.

“The plaintiff’s loss or damage was inevitably ’caused directly or indirectly’ by the coronavirus, and the virus exclusion clause applies,” the judge wrote in a November 2 memorandum on the dismissal order .

Agilitas, which has physiotherapy centers in eight southern states and Indiana, also argued that the policy’s business income clause applied. But the judge said that this clause only covers “direct physical loss” or damage to the plaintiff’s property.

The plaintiff spends much ink on his argument that the police do not define the terms ‘damage’ or ‘loss’ and that under Tennessee law the court must interpret these terms disjunctively, as distinct from each other, and that the term ‘loss’ should be interpreted to encompass his loss of access to covered premises, ”Trauger wrote.

The judge disagreed with the complainant, citing a September 6 decision by the United Statese Circuit Court of Appeals in an Ohio case. In Henderson Road Restaurant Systems v. Zurich American Insurance Co., the appeals court ruled that the policy’s coverage for direct physical loss did not apply to loss of earnings resulting from the COVID shutdown.

The Agilitas shutdown in Tennessee came on the same day as the 6e Circuit has upheld the dismissal of a similar lawsuit filed by preschools in Ohio. The centers had argued that the insurance company, Philadelphia Indemnity, had wrongly denied their business interruption claim. Closure orders did not cause physical damage to business, appeals court noted.

Nationally, virus lawsuits have gone badly in courts, especially federal courts. The University of Pennsylvania Law School follow-up of disputes reports that in federal courts, insurers have requested that 509 lawsuits be dismissed. The judges agreed to reject 93% of them. Most of them were rejected with prejudice and cannot be resubmitted.

In the Agilitas case, the plaintiffs did not advance the argument which appears to have gained ground in at least one federal courtroom. In Novant Health Inc. v American Guarantee and Liability Insurance in North Carolina, health system lawyers argued that the virus had physically damaged the air inside clinics.

For this and because of the contradictory language of the insurance policy, the United States District Court in North Carolina made a rare exception and allowed the prosecution.

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COVID-19 lawsuits Tennessee

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