A Dallas federal judge ruled Tuesday that insurance companies do not have to cover claims of financial damage caused by Covid-19 brought under their “all risk” commercial property policies.
U.S. District Judge Sidney Fitzwater, in a 16-page opinion, wrote that a Minnesota dentist cannot bring breach of contract or declaratory judgment claims against the property insurer because the Covid-19 virus did not “cause direct physical damage or loss” to her dental office as required by the insurance policy.
Dr. Christie Jo Berkseth-Rojas, suing “on behalf of all others similarly situated,” claimed in her lawsuit that her property insurance policy with Aspen American Insurance Company should cover the financial losses she suffered because of the coronavirus.
Judge Fitzwater disagreed.
“Put simply, Dr. Berkseth-Rojas does not plead that her insured property suffered direct physical damage or loss due to Covid-19,” Judge Fitzwater wrote. “She alleges, instead, that she was forced to reduce her patient capacity and institute remedial measures to prevent the spread of Covid-19 among humans. As numerous courts nationwide have held, Covid-19 does not cause physical damage to property; it causes people to get sick.”
Judge Fitzwater pointed to an opinion this past March by Chief Judge Lee Rosenthal of the Southern District of Texas as support.
Berkseth-Rojas is represented by Houston trial lawyers Mark Lanier and Alex Brown and Dallas attorney Adam Reed. Ralph McBride, who is the former head of litigation at Bracewell and now of counsel at the Lanier Law Firm, also advises the dentist.
Leading the defense for Aspen is Sidley Austin partner Yvette Ostolaza, who is chair-elect of the management committee of the global law firm. Fellow Dallas partner Yolanda Garcia and Dallas associate David Mason Parham are also involved in the litigation for Aspen.
Berkseth-Rojas filed her lawsuit in April 2020 claiming that the coronavirus altered and damaged her property causing her to lose business and make changes to her office, including installing Plexiglass shields to protect patients and requiring patients to wait in their cars instead of her waiting room.
“At least three members of Rojas Family Dental staff have contracted Covid-19 while working on covered property,” the plaintiff’s lawyers wrote in the amended complaint filed last October. “It is thus an absolute certainty that covered property has been infiltrated and contaminated by Covid-19 by those three persons and likely numerous others.
“The virus was there,” the complaint stated. “The virus was harmful. Its adhesion to the air in the property and property altered the property and made it harmful. Plaintiff thus has been forced to suspend or reduce her practice due to Covid-19 and the resultant executive orders issued by the governor of Minnesota that non-emergency or elective dental care that requires personal protective equipment (PPE) be postponed indefinitely.”
Even if all of Berkseth-Rojas’ allegations are true, Aspen’s lawyers argued, she has not alleged that the presence of Covid-19 on the property actually caused the dentist to suspend or reduce operations and thus resulting in lost business income.
Aspen’s lawyers argued that Covid-19 can be easily cleaned from surfaces and that the virus affects human health, not property.
Judge Fitzwater sided with Aspen.
“Dr. Berkseth-Rojas has not plausibly pleaded that her insured property suffered an injury due to the mere presence of Covid-19,” the judge wrote. “It is true that, in certain circumstances, contamination by smoke or asbestos can constitute a covered injury to property. But these cases concern different facts and do not broadly hold that the presence of any potentially harmful particles, like Covid-19, inside or on a property necessarily causes ‘injury’ to the property under the terms of a policy.”
Efforts to obtain comments from lawyers for both sides were unsuccessful Tuesday evening.