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High Court Won't Hear COVID Insurance Physical Loss Fight

The Supreme Court on Monday declined to consider whether the Fourth Circuit abused its discretion by refusing to send a Maryland auto auction company's pandemic coverage questions to the state's top court.

From Law360 Insurance Authority:


The court's decision was noted in a single line denying writs for certiorari before judgment, which the court typically grants only when it feels a case is of such import that it would be prudent to bypass a circuit court. The decision means Bel Air Auto Auction Inc. won't be able to force the Fourth Circuit to put its questions about pandemic-related insurance coverage to the Maryland Supreme Court.


Bel Air's case is still pending at the intermediate appellate court, where it has argued that it's entitled to coverage under its policy with a Chubb unit because the coronavirus caused the loss of use of its properties.


"This case is not a one-off case between an insurance company and its insured, where the focus is on only the appellant and the appellee," Bel Air said in November, urging the Supreme Court to take up its appeal. "This is a case of national importance where the rights of many insurance companies and their insureds are at issue."


Bel Air sought the high court's input after the Fourth Circuit declined to send to Maryland's top court questions on whether a property contaminated with the coronavirus could qualify it for coverage under its policy with Great Northern Insurance Co., or if coverage could only be afforded when a property has been physically altered.


The company said that while a Fourth Circuit ruling might be binding precedent for federal courts in Maryland, such a ruling would not be binding on Maryland state courts, or courts applying Maryland law to their cases. Bel Air said the Fourth Circuit's refusal to certify its questions amounted to an abuse of discretion.


Earlier, in June, it said that "Under Maryland law applicable to the construction and interpretation of insurance policies, loss of full use from a ubiquitous contaminating substance like SARSCov-2 and COVID-19 constitutes 'direct physical loss or damage.'"


Great Northern countered in August, arguing that although government closure orders restricted Bel Air Auto Auction Inc.'s business, the business' own allegations showed that the coronavirus never harmed its property and did not change its facilities' physical condition in any way as required by its "all risk" policy.


The petition for a writ of certiorari came in November, according to court documents.


Counsel for Great Northern didn't immediately respond to questions on what the denial meant for Bel Air's pandemic coverage suit, and a Chubb spokesperson declined to comment. Counsel for Bel Air declined to comment, and a company spokesperson didn't respond to a request for comment.


Bel Air was one of a growing number of policyholders to try to send questions on its case to a state high court. But Great Northern successfully argued that Maryland's high court didn't need to be burdened, saying the Fourth Circuit could decide if the coronavirus physically damaged Bel Air Auto's property. The case wasn't so rare, and could be resolved through the straight application of Maryland law, the insurer said.


Federal courts around the country have permanently tossed about 41% of the 1,296 suits from policyholders against their insurance companies seeking pandemic loss-related coverage, according to Law360's COVID-19 Insurance Case Tracker. Another 18% of the pandemic insurance suits filed in federal courts have been voluntarily dismissed, the tracker shows, and almost 40% have yet to be fully decided. Data from state courts is incomplete.


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