Professional Negligence Law Reporter

The Eleventh Circuit Court of Appeals held that an insured was not entitled to recover insurance benefits for business interruption absent evidence of direct physical loss or damage.

Here, in 2020, Georgia’s governor declared a public health state of emergency and subsequently ordered state residents to shelter in place. Under the order, residents could leave their home to participate in essential services, which, the CDC later clarified as including urgent patient visits. Gilreath Family & Cosmetic Dentistry canceled its routine and elective dental procedures under the order and lost a substantial portion of its income. It filed a claim for business interruption coverage with its insurer, Cincinnati Insurance Co. The insurer denied the claim on the basis that Gilreath Dentistry had failed to claim any direct physical loss or damage to property.

Gilreath Dentistry, on behalf of itself and similarly situated dental practices, sued Cincinnati Insurance, alleging the insurer had breached the terms of the parties’ insurance policy. The trial court dismissed the complaint.

Affirming, the Eleventh Circuit noted that the business income and extra expense provisions of the plaintiff’s policy apply where an event, such as the pandemic here, led to direct physical loss or damage to the plaintiff’s property. Citing case law, the court explained that there must be an actual change to the plaintiff’s property that made it unsatisfactory for future use or that necessitated repairs. Here, the court said, the plaintiff has not alleged physical loss or damage and does not assert that the shelter in place order damaged or changed the dental practice’s property in a way that required repairs or precluded future use. The court rejected the plaintiff’s argument that its enclosed office space, where particles could linger, constituted physical damage. The presence of such particles did not result in physical damage or loss, the court said.

Consequently, the trial court’s ruling was proper.

Citation: Gilreath Family & Cosmetic Dentistry, Inc. v. Cincinnati Ins. Co., 2021 WL 3870697 (11th Cir. Aug. 31, 2021).