Judge dismisses Scranton Club's COVID-19 insurance lawsuit

Feb. 5—An insurance company does not have to pay a Scranton social club for revenue it lost during pandemic-related shutdown orders, a Lackawanna County judge ruled.

Judge Terrence Nealon said the Scranton Club, 404 N. Washington Ave., cannot recover damages from Tuscarora Wayne Mutual Group because its business interruption policy only applies if the business was shut down because of physical damage to the structure that made it uninhabitable.

Scranton attorney Marion Munley filed suit on behalf of the club in June, alleging Tuscarora breached its contract with the club when it refused to reimburse it for losses incurred during several state-mandated shutdown orders instituted to help halt the spread of COVID-19.

The case is among numerous lawsuits filed in state and federal courts nationwide challenging insurers' denial of business interruption claims for pandemic-related losses. As of Dec. 28, 1,453 lawsuits have been filed, according to the University of Pennsylvania Law School, which is tracking the cases.

Most of the cases have hinged on exclusions within the insurance policies that bar recovery if losses are caused by a virus and/or a dispute over whether the virus can be found to have caused physical damage.

In the Scranton Club case, Nealon denied Tuscarora's motion to dismiss the case based on the virus exclusion. The judge said he could not determine at this stage of the litigation if the exclusion would apply because there is a factual dispute over whether the virus was ever present in the building. The club maintained it was not because no one there ever tested positive.

Nealon nonetheless tossed the case based on his findings relating to other portions of the policy that require the club show the structure suffered physical damage.

"The Scranton Club has not alleged any facts which arguably satisfy the 'direct physical loss damage' requirement for business income and extra expense coverage under the policy," Nealon said. "Accordingly, it is clear and free from doubt that the Scranton Club cannot recover under the business interruption and extra expense provisions of the policy."

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