Route 40 Diner, Precious Treasures, Mac Property Group, and The Cake Boutique each sued their insurance companies for breach of contract, alleging they improperly refused to cover plaintiffs' insurance claims for business losses they sustained due to the issuance of the executive orders, according to the opinion. Mattdogg Inc. and Salted Lime & Kitchen sued their insurers seeking declaratory judgments requiring payment of plaintiffs' business loss claims sustained due to the executive orders.

The insurance companies named as defendants included Selective Fire and Casualty, Markel Insurance, Blackboard Insurance, Wesco Insurance, Amtrust Financial, and Philadelphia Indemnity Insurance.

Judge Thomas W. Sumners, in his written opinion for the court, stated that, "the motion judges were correct in granting Rule 4:6-2(e) dismissals of plaintiffs' complaints with prejudice for failure to state a claim on the basis that plaintiffs' business losses were not related to any 'direct physical loss of or damage to' covered properties as required by the terms of their insurance policies."

The plaintiff businesses argued that "direct physical loss of or damage to" is ambiguous language. Sumners disagreed by citing the policies' business income coverage which provides such coverage during a "period of restoration." That period is defined as the amount of time it takes the property to be "repaired, rebuilt, or replaced."

Sumners stated that the fact the policies provided for a "period of restoration" following direct physical loss supports his interpretation of the clause that no such loss occurred.

Sumners further stated that the business owners were not covered under their policies' civil authority clauses. "To trigger coverage," said Sumners, "the action of the civil authority needed to be taken 'as a result of the damage' to nearby property, and either 'in response to dangerous physical conditions resulting from the damage or continuation of the Covered Cause of Loss that caused the damage' or 'to enable a civil authority to have unimpeded access to the damaged property.'"

"We further conclude defendants' denial of coverage was not barred by regulatory estoppel," stated Sumners. "In the alternative, we conclude that even if plaintiffs' business losses otherwise satisfied the requirements of the relevant clauses, coverage was barred by their insurance policies' virus exclusions and endorsements because the EOs were a direct result of COVID-19.

"We discern no reason to depart from the persuasive reasoning expressed in the scores of federal courts and other state appeal courts that have rejected identical insurance claims seeking business losses as a result of being forced to shut down or significantly limit their operations due to the imposition of government orders to curb the COVID-19 pandemic," stated Sumners, citing what the U.S. Court of Appeals for the Seventh Circuit called a "growing national consensus."

"We recognize that COVID-19 has caused overwhelming economic losses to untold businesses and individuals dependent on those businesses in our state, nation, and the world," concluded Sumners. "Nevertheless, in the context of the issues presented in this appeal, plaintiffs' insurance claims are restricted by the clear and plain meaning of their insurance policies, which we cannot rewrite to cover their unfortunate losses."

Judges Frances J. Vernoia and Lisa A. Firko affirmed the opinion.

Bennett Evan Cooper of Dickinson Wright, admitted pro hac vice, argued the case for Markel Insurance and declined to comment for this article.

Also admitted pro hac vice were Keith Moskowitz of Dentons, who represented Blackboard Insurance, and Steven E. Goldman of Walsh Pizzi O'Reilly Falanga, who represented Philadelphia Indemnity Insurance. Neither responded immediately to requests for comment.

Elizabeth J. Sher of Day Pitney, who represented Selective Fire and Casualty, could not be reached for comment. Thomas E. Hastings of Dilworth Paxson, who represented Wesco Insurance Co., declined to comment for this article.

Counsel representing the business owners could not be reached for comment. They included Ashley S. Nechemia of Mattleman, Weinroth & Miller, who argued for Precious Treasures, Kevin J. Kotch of the Ferrara Law Group, who argued for FAFB and Mattdogg, and Robert W. Williams of Mattleman, Weinroth & Miller, on brief for MAC Property Group, The Cake Boutique, Country Diner of Mullica Hill, and Pearl Three Two.