In what can be considered a victory for the drinking classes (see Taps & Bourbon on Terrace, LLC v. Underwriters at Lloyds London, et al.), a Philadelphia judge recently ruled that a tavern’s lawsuit for business interruption coverage for losses caused by COVID-19 will survive for another round. Taps & Bourbon on Terrace (“Taps & Bourbon”) alleged that it sustained business losses resulting from “the COVID-19 pandemic and  state and local orders mandating that all non-essential businesses be temporarily closed.” In what has become a familiar rejoinder during this pandemic, its carrier denied coverage on the grounds that there was “no ‘direct physical loss’ to the property, the civil authority coverage provision does not apply, and the virus exclusion provision precludes coverage.”
The denial of coverage gave rise to a lawsuit in the Court of Common Pleas of Philadelphia County by Taps & Bourbon and the insurance carrier moved to dismiss. In considering the motion, the court was constrained to view as true all of the material facts and inferences set forth in the complaint. In so doing, the court held that the tavern had successfully pled enough to survive at that preliminary stage in the proceedings. Moreover, the court was loathe to dismiss the complaint since, as it expressly recognized, “the law and facts are rapidly evolving in the area of COVID-19 related to business losses.”
The court’s order does not provide much more grist for consideration. However, we can distill from the operative complaint that Taps & Bourbon had purchased a business interruption policy that provided “coverage for direct physical loss of or damage to Covered Property…resulting from any Covered Cause of Loss.” Additionally the policy offered coverage if food contamination resulted in business closure by a governmental authority.
The complaint further alleges that on March 19, 2020, Pennsylvania Governor Tom Wolf issued an Executive Order closing all non-life sustaining businesses in order to prevent and suppress COVID-19. Although it is certainly open to debate whether or not its business is life sustaining (see George Bernard Shaw’s and others’ thoughts on that very point here), Taps & Bourbon nonetheless immediately closed its doors in response to the Executive Order. Significantly, the complaint also holds forth on why the insurer’s position that there was no direct physical damage is incorrect, namely that the pandemic has been declared a “Disaster Emergency”, affecting all property located within Pennsylvania.
What is conspicuously absent from the complaint are allegations that COVID-19 was present on Taps & Bourbon’s premises – although the tavern claims it took measures to disinfect and “clean surfaces potentially infected with the disease.” Such facts have shown to be central to businesses’ success so far in COVID-19-related disputes, as well as in other communicable disease-related coverage cases.
This case marks the latest matter to join the minority ranks of COVID-19 business loss coverage cases surviving dismissal motions, as we discussed here. As the Taps & Bourbon court noted, the law related to COVID-19 business losses continues to evolve. This should be heartening to policyholders and signals that at least some courts may view these types of disputes as being incapable, at least initially, of resolution as a matter of law. As for Taps & Bourbon, we toast its early success, offering up a hearty “Slainte!”, while waiting for the case to come of age.