(Article from Insurance Law Alert, April 2020)
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The Pennsylvania Supreme Court upheld an executive order requiring the closure of all nonlife-sustaining businesses, ruling that the COVID pandemic is a “natural disaster,” as defined by the relevant state Emergency Code. Friends of Danny DeVito v. Tom Wolf, Governor, 2020 WL 1847100 (Pa. Apr. 13, 2020).
Several businesses sought to invalidate the March 16 Executive Order issued by Pennsylvania Governor Tom Wolf on statutory and constitutional grounds. The Pennsylvania Supreme Court observed that the Governor has “broad powers” under the Emergency Code to limit movement and occupancy within the state as a result of a natural disaster. The Code defines “natural disaster,” in part, as: “Any hurricane, tornado, storm, flood, high water, wind-driven water, tidal wave, earthquake, landslide, mudslide, snowstorm, drought, fire, explosion or other catastrophe which results in substantial damage to property, hardship, suffering or possible loss of life.” The court concluded that the COVID pandemic falls within the scope of this definition, emphasizing that “hardship, suffering [and] possible loss of life” have resulted from the virus. In so ruling, the court rejected the plaintiffs’ assertion that the COVID pandemic is not a “natural disaster” under the Code because viral illness is not included in the list of triggering events and is not of the same type or kind of catastrophe as those listed in the Code.
The Court also rejected the business owners’ argument that even if the pandemic is a natural disaster under the Code, the Governor was authorized only to act in “disaster areas” and improperly closed down businesses in non-disaster areas. The court reasoned that all counties in which the businesses operated had reported COVID cases, and that in any event, given the rapid transmission of the virus, that any location where two or more people can congregate is within the disaster area.
Policyholders’ attorneys have begun to argue that Friends of Danny DeVito lends support to the assertion that COVID-related losses were caused by “physical loss or damage” for insurance coverage purposes (akin to weather-related natural disasters). It should be noted that the Court’s ruling turns on specific language in Pennsylvania’s Emergency Code, which does not include a physical loss or damage requirement, as is the case for many common business interruption and civil authority coverage provisions of property insurance policies.