Conn. Dermatology Grp., PC v. Twin City Fire Ins. Co.

• Decision Date: 27 January 2023
• Docket Number: SC 20695
• Parties: CONNECTICUT DERMATOLOGY GROUP, PC, et al. v. TWIN CITY FIRE INSURANCE COMPANY et al.
• Court: Connecticut Supreme Court

346 Conn. 33

288 A.3d 187

CONNECTICUT DERMATOLOGY GROUP, PC, et al.

v.TWIN CITY FIRE INSURANCE COMPANY et al.

SC 20695

Supreme Court of Connecticut.

Argued September 15, 2022

Officially Released January 27, 2023^*

R. Cornelius Danaher, Jr., Hartford, with whom were Thomas J. Plumridge and, on the brief, Calum B. Anderson, Hartford, Allan Kanner, pro hac vice, and Cynthia St. Amant, pro hac vice, for the appellants (plaintiffs).

Jonathan M. Freiman, New Haven, with whom were Ariela C. Anhalt, New Haven, and, on the brief, Sarah D. Gordon, pro hac vice, Erica Gerson, pro hac vice, and Justin Ben-Asher, pro hac vice, for the appellees (defendants).

Robinson, C. J., and McDonald, D'Auria, Mullins, Ecker, Alexander and Keller, Js.

ROBINSON, C. J.

The dispositive issue in this appeal is whether a property insurance policy providing coverage for "direct physical loss of or physical damage to" covered property provides coverage for business income losses arising from the suspension of business operations during the COVID-19 pandemic. The plaintiffs, Connecticut Dermatology Group, PC (Connecticut Dermatology), Live Every Day, LLC (Live Every Day), and Ear Specialty Group of Connecticut, PC (Ear Specialty Group), own and operate healthcare facilities at various locations in Connecticut. They suspended their business operations during the COVID-19 pandemic and, as a result, lost business income and incurred other expenses. The plaintiffs filed claims for their losses with the defendants, Twin City Fire Insurance Company, Sentinel Insurance Company, Ltd., Hartford Fire Insurance Company, doing business as The Hartford, and the Hartford Financial Services Group, Inc., under insurance policies containing provisions requiring the insurance companies to "pay for direct physical loss of or physical damage to" covered property caused by a covered cause of loss. The defendants denied the claims, and the plaintiffs brought this action seeking, among other things, a judgment declaring that the insurance policies covered their economic losses. The plaintiffs now appeal¹ from the trial court's granting of the defendants' motion for summary judgment on the ground that the claimed losses were subject to a virus exclusion in the policies. We affirm the trial court's judgment on the alternative ground that there is no genuine issue of material fact as to whether the policies did not cover the plaintiffs' claims because the plaintiffs did not suffer any direct physical loss of covered property.

The record, which we view in the light most favorable to the plaintiffs for purposes of reviewing the trial court's rendering of summary judgment, reveals the following facts and procedural history. The plaintiffs are insured under separate but identical commercial insurance policies issued by the defendants.² The policies provide in relevant part that the defendants "will pay for direct physical loss of or physical damage to [c]overed [p]roperty at the premises described in the [d]eclarations (also called ‘scheduled premises’ ...) caused by or resulting from a [c]overed [c]ause of [l]oss." In addition, the policies provide that the defendants "will pay for the actual loss of [b]usiness [i]ncome [the insured] sustain[s] due to the necessary suspension of [its] ‘operations’ during the ‘period of restoration’ " and for "reasonable and necessary [e]xtra [e]xpense [the insured] incur[s] during the ‘period of restoration’ that [it] would not have incurred if there had been no direct physical loss or physical damage to property at the ‘scheduled premises’ ...." The policies define "period of restoration" in relevant part as "the period of time that: (a) [b]egins with the date of direct physical loss or physical damage caused by or resulting from a [c]overed [c]ause of [l]oss at the ‘scheduled premises,’ and (b) [e]nds on the date when: (1) [t]he property at the ‘scheduled premises’ should be repaired, rebuilt or replaced with reasonable speed and similar quality; (2) [t]he date when [the insured's] business is resumed at a new, permanent location. ..."

In early 2020, the world experienced the outbreak of the highly virulent infectious disease known as COVID-19.

The outbreak and ensuing pandemic were fueled by close contact between people in indoor spaces. In response to the pandemic, government officials and agencies at both the state and federal levels issued numerous emergency orders, recommendations and guidelines intended to prevent or slow the spread of the disease. These decrees directed people to stay at home if possible, imposed social distancing rules, limited occupancy of certain buildings, and urged the installation of Plexiglass barriers, increased ventilation and the regular disinfection of surfaces to prevent transmission of the coronavirus inside buildings. One such order, which temporarily required the elimination of in-person workforces for nonessential businesses and required telecommuting or work from home "to the maximum extent possible" for all other businesses or not-for-profit entities, was Governor Ned Lamont's Executive Order 7H,³ which he issued on March 20, 2020. The order classified "hospitals, clinics" and "companies and institutions involved in ... any other healthcare related supplies or services" as "essential" businesses.

In response to the pandemic, in March, 2020, the plaintiffs suspended the operation of their businesses.⁴

As a result, they suffered losses of business income. The plaintiffs also incurred costs in connection with the daily sanitation of their premises and the erection of physical barriers to protect patients and staff and to minimize the suspension of normal operations. They submitted claims for their losses to the defendants, which either denied the claims or failed to respond.⁵ In their letters denying the claims, the defendants stated that, "[because] the coronavirus did not cause property damage at [the insured's] place of business or in the immediate area, this business income loss is not covered."

Thereafter, the plaintiffs brought this action seeking, among other things, a judgment declaring that the defendants were obligated to provide coverage for "sue and labor" expenses,⁶ current and future lost business income, and "extra expense" related to the costs of daily sanitation and erecting physical barriers during the suspension of operations.⁷ In their answer, the defendants denied the plaintiffs' substantive allegations and claimed as a special defense that, if the plaintiffs suffered any losses that would otherwise be covered by the insurance policies, the losses were subject to an exclusion for "loss or damage caused directly or indirectly by ... [the] [p]resence, growth, proliferation, spread or any activity of ‘fungi,’ wet rot, dry rot, bacteria or virus" (virus exclusion).⁸

The parties filed separate motions for summary judgment. In their motion, the defendants contended, among other things, that there was no genuine issue of material fact as to whether the insurance policies did not cover the claimed losses because there was no " ‘direct physical loss of or physical damage to’ " any property covered by the policies. In addition, the defendants contended that there was no genuine issue of material fact as to whether, if there was a loss that otherwise would be covered, it was subject to the virus exclusion. In their motion, the plaintiffs claimed, among other things, that there was no genuine issue of material fact as to whether the insurance policies provided coverage because the plaintiffs had suffered a "direct physical loss" of covered property. The trial court concluded that the plaintiffs' claims were subject to the virus exclusion and rendered summary judgment for the defendants. This appeal followed.

On appeal, the plaintiffs claim that the trial court incorrectly concluded that their claims were subject to the virus exclusion. The defendants disagree and further contend, as an alternative ground for affirmance, that the insurance policies did not cover the losses because there was no "direct physical loss of or physical damage to" any property covered by the policies. We agree with the defendants that the insurance policies do not cover the plaintiffs' losses, and, therefore, we need not decide whether the trial court correctly determined that their claims were subject to the virus exclusion. See, e.g., State v. Burney , 288 Conn. 548, 560, 954 A.2d 793 (2008) ("[i]t is well established that this court may rely on any grounds supported by the record in affirming the judgment of a trial court"); see also, e.g., Grady v. Somers , 294 Conn. 324, 349–50 n.28, 984 A.2d 684 (2009) (addressing alternative ground for affirmance that trial court did not reach because it involved question of law over which review was plenary).

"The standard of review of a trial court's decision to grant summary judgment is well established. [W]e must decide whether the trial court erred in determining that there was no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. ... In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party. ... The test is whether a party would be entitled to a directed verdict on the same facts." (Internal quotation marks omitted.) Heisinger v. Cleary , 323 Conn. 765, 776, 150 A.3d 1136 (2016). "This court's review of the trial court's decision to grant summary judgment in favor of the defendants is plenary." Id., at 777, 150 A.3d 1136.

"The general principles that guide our review of insurance contract interpretations are well settled. [C]onstruction of a contract of insurance presents a question of law for the court [that] this court reviews de novo. ... An insurance policy is to be interpreted by the same general rules that govern the construction of any written contract. ... In accordance with those principles, [t]he determinative question is the...