‘Essential’ clinics can proceed with COVID claim

A federal judge ruled Sept. 21 that business-interruption insurance coverage might exist for businesses that experienced a slowdown, but not an outright closure, as a result of the COVID-19 pandemic. 

U.S. District Judge Stephen R. Bough of the Western District of Missouri declined a motion to dismiss from Owners Insurance Company, which faces a putative class action lawsuit by four Kansas City-area dental clinics. Blue Springs Dental Care, Green Hills Dental, Highland Dental Clinic and Kearney Dental allege they were denied coverage for losses they have incurred since local stay-at-home orders were issued in March.

Bough’s ruling builds on a similar decision he made last month in a separate case, in which he found that the novel coronavirus fell under the policy’s coverage for “direct physical loss.”  That suit, however, involved hair salons and restaurants operating under policies issued by Cincinnati Insurance that covered partial suspension of operations. 

In contrast, the dental clinics’ policies do not define “suspension.” The insurer argued that, because dentists were designated as “essential” businesses that were allowed to continue their operations, the plaintiffs’ alleged losses weren’t covered. 

Bough held that, at this early stage in the litigation, the clinics’ claims could proceed. The dictionary definition of “suspension” doesn’t require it to be in a “full, complete, or total fashion,” he wrote. 

And while the insurer made “persuasive arguments” about how the exemption for “essential” businesses impacted the plaintiffs’ alleged physical losses, Bough added, at this stage they didn’t need to show that their businesses were “unusable or uninhabitable.” 

“Owners’ argument does not challenge the sufficiency of the pleadings so much as the nature, scale, and scope of the alleged physical loss, including whether the actual danger posed by COVID-19 was concrete, severe, or imminent enough to prevent Plaintiffs from being able to use the dental clinics for their intended purpose,” the judge wrote. “That is an issue better suited for resolution at the summary judgment stage, after the parties have had the benefit of discovery.”

Pat Stueve of Stueve Siegel Hanson in Kansas City, an attorney for the dental clinics, said the plaintiffs now will need to prove that the losses were due to COVID-19. He argued that, under the stay-at-home orders, people could go to the dentist only for emergencies. Three of the clinics shut down entirely, while one continued to offer only emergency services.

“Remember, these dental offices do teeth cleaning, all kinds of things that do not fall within that” exemption for essential businesses, Stueve said. 

Two attorneys for the insurer, George Verschelden and Todd Noteboom of Stinson, didn’t respond to a request for comment.

The case is Blue Springs Dental Care LLC v. Owners Insurance Company, 4:20-cv-00383.