Ungarean v. CNA
| Decision Date | 30 November 2022 |
| Docket Number | 490 WDA 2021, No. 948 WDA 2021 |
| Citation | 286 A.3d 353 |
| Parties | Timothy A. UNGAREAN, DMD d/b/a Smile Savers Dentistry, PC, Individually and on Behalf of a Class of Similarly Situated Persons v. CNA and Valley Forge Insurance Company, Appellants Timothy A. Ungarean, DMD d/b/a Smile Savers Dentistry, PC, Individually and on Behalf of a Class of Similarly Situated Persons v. CNA and Valley Forge Insurance Company, Appellants |
| Court | Pennsylvania Superior Court |
Ilana H. Eisenstein, Philadelphia, for appellant.
James C. Haggerty, Philadelphia, for appellee.
Scott B. Cooper, Harrisburg, for appellee.
Like so many other businesses, the dental practice of Timothy Ungarean, DMD, d/b/a Smile Savers Dentistry, PC ("Ungarean") suffered significant losses when business was disrupted by the COVID-19 pandemic. Ungarean sought coverage for those losses under the business interruption provisions of the business insurance policy he had bought from CNA and Valley Forge Insurance Company ("CNA") ("CNA Policy"). After CNA denied his claim, Ungarean filed a complaint seeking a declaration under the Declaratory Judgments Act, 42 Pa.C.S.A. §§ 7531 - 7541, that the CNA Policy covered his loss. Ungarean followed that complaint with a motion for summary judgment, which the Allegheny County Court of Common Pleas granted. The court declared Ungarean was entitled to business interruption coverage because COVID-19 and the related governmental orders had caused Ungarean to suffer a direct physical loss of his dental practice, which was within the ambit of coverage provided by the CNA Policy. Moreover, the court found that the exclusions CNA tried to invoke to deny coverage were not applicable to Ungarean's claim.
We are in full agreement with the court's conclusions. We are also in full agreement with the court's reasoning in support of those conclusions. Therefore, based primarily on the trial court's thoughtful opinion, we affirm the court's order granting summary judgment and declaring that coverage is owed to Ungarean for his COVID-related business losses under the specific terms of the CNA Policy.1
The bulk of the factual background leading to this appeal is uncontroverted. Ungarean owns and operates a dental practice, with an office in Pittsburgh and an office in Aliquippa. The practice of dentistry necessarily requires close contact not only between the dentist and his patients, but also between the patients and various staff at the office.
To protect himself from unforeseen interruptions of his practice, Ungarean procured an insurance policy from CNA that provided coverage for certain losses associated with the dental practice during the year from April 1, 2019, to April 1, 2020. In March 2020, the state of Pennsylvania was struck by the full force of the COVID-19 pandemic. COVID-19 is a novel contagious virus that can cause severe acute respiratory illness. In the first three months of the pandemic, it killed thousands of Pennsylvanians, and over 100,000 people nationwide.
After consulting with public health experts, Governor Tom Wolf issued several orders in March 2020 directing that all non-essential businesses should close until further notice. Further, the Governor issued an order directing the residents of Allegheny County, which contains the city of Pittsburgh, to stay at home.
In addition to these shutdown orders, public health officials implemented masking and social distancing protocols. Even those businesses that were deemed essential were required to modify their business models by decreasing the number of people allowed in buildings and requiring people to remain masked. Furthermore, in these early months, enhanced cleaning protocols were implemented due to fears that the virus could linger for days on hard surfaces.
As a result of the pandemic, Ungarean was forced to close his dental practice to the public except for emergency dental procedures. He claims this caused a drastic loss in income from the practice, causing him to furlough employees and suffer other harmful consequences. As a result, Ungarean filed a claim with CNA for these losses under the CNA Policy which provides coverage for, inter alia, loss of business income due to the physical loss of or damage to covered property. CNA denied coverage on the basis that Ungarean's dental practice did not suffer physical damage.
Ungarean filed a class action complaint asserting one count of relief under the Declaratory Judgments Act. See Complaint, 6/5/20, at ¶ 77. In essence, Ungarean sought a declaration that his pandemic-related business losses were covered under the CNA Policy's Business Income, Extra Expense and Civil Authority provisions. See id. at ¶¶ 7, 31, 34. Ungarean subsequently filed a motion for summary judgment, which the trial court granted on the basis that Ungarean had, in fact, suffered a direct physical loss of his dental practice and was therefore owed business insurance coverage under the policy.2 CNA filed a timely notice of appeal and raises two issues:
At the core, CNA challenges the trial court's declaration under the Declaratory Judgments Act that Ungarean was entitled to coverage under the CNA Policy. "The purpose of the Declaratory Judgments Act is to settle and to afford relief from uncertainty and insecurity with respect to rights, status, and other legal relations[.]" Allen , 692 A.2d at 1092-93. "In reviewing a declaratory judgment action, we are limited to determining whether the trial court clearly abused its discretion or committed an error of law." Kline , 223 A.3d at 684. We review the trial court's decision "as we would a decree in equity." Id . As such, we defer to the factual findings of the trial court unless they are unsupported in the record. See id . In contrast, we give no such deference to the trial court's application of the law. See id .
In this action, Ungarean sought to settle whether the CNA Policy covered his losses arising from the COVID-19 pandemic. This presents a question of law for our review. See Kramer v. Nationwide Prop. and Casualty Ins. Co. , 271 A.3d 431, 436 (Pa. Super. 2021). In conducting that review, we are mindful that "disputes over coverage must be resolved only by reference to the provisions of the policy itself." Id. (citation omitted). It is therefore imperative that we look to the text of the CNA Policy, because just as in every case in which an insured claims business related losses caused by COVID-19, each individual policy must be examined based solely on its own language.
Business Income and Extra Expense Provisions
The trial court first found that Ungarean was entitled to coverage under the CNA Policy's Business Income and Extra Expense provisions, which state in relevant part:
CNA Policy, Business Income and Extra Expense Endorsement, at 1.b., 2a. The policy defines "suspension" as "[t]he partial or complete cessation of your business activities; or ... [t]hat a part or all of the described premises is rendered untenantable." CNA Policy, Businessowners Special Property Coverage Form, at G.29. Further, the policy defines "operations" as "the type of your business activities occurring at the described premises and tenantability of the described premises." Id. , at G.19.
"Direct physical loss of or damage to"
The provisions provide coverage for the loss of business income and extra expenses incurred due to the suspension of an insured's operations caused by a "direct physical loss of or damage to" the covered property. See CNA Policy, Business Income and Extra Expense Endorsement, at 1.b., 2a. As the trial court makes clear, whether Ungarean's claim is covered under these provisions of the CNA Policy hinges on the meaning of the phrase "direct physical loss of or damage to property." Trial Court Opinion, 3/25/21, at 10. CNA argues that the phrase necessarily requires a physical alteration to the subject property, and any other interpretation is unreasonable. Ungarean, meanwhile, argues that it is reasonable to interpret the phrase as encompassing the loss of use of the property even in the absence of actual physical harm to the property.
Importantly, the CNA Policy does not define "direct," "physical," "damage," and, perhaps most significantly in our view, "loss." The trial court therefore turned to the dictionary definitions of these words to determine whether Ungarean's interpretation of the phrase as including the loss of use of his property was a...
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...of insurance coverage are fact intensive inquiries that depend on the specific language of a policy. See Ungarean, ––– Pa.Super. at ––––, 286 A.3d 353, 2022 WL 17334365, at *11 ; MacMiles, ––– Pa.Super. at ––––, 286 A.3d 331, 2022 WL 17332910, at *8 (Panella, J. concurring). We nevertheless......
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