Florida Federal Judge Rejects Dentist’s Attempt to Evade Virus Exclusion in Insurance Policy

The United States District Court for the Middle District of Florida recently ruled that a Southwest Florida dentist cannot claim for Coronavirus-related damages under his business interruption policy. Mauricio Martinez DMD, P.A. v. Allied, 2:20-cv-00401-FtM-66NPM (M.D. Fla. Sept. 2, 2020) (Badalamenti, J.).

According to the opinion, “[t]he overarching cause of the alleged loss, Martinez maintains, is the impact of the COVID-19 virus and the Governor of Florida’s COVID-19 emergency declaration, which limited dental services.” Id. at *1. The Court rejected the claim “[b]ecause the insurance policy expressly excludes coverage from damages caused by a virus.” In other words, the Court did not have to grapple with the question of whether Coronavirus shutdowns are covered by the policy, because viruses are expressly excluded from coverage. Importantly, the exclusion applies to loss or damage caused “directly or indirectly,” by any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease.” Id. at *4 (quotes and citations omitted).

As the Court notes, contract interpretation is a question of law, meaning that it may be decided by the Court at the beginning of a lawsuit. Id. at *4. When contracts are clear, courts must enforce them as written. Id. For that reason, many Coronavirus insurance lawsuits are likely to be disposed of quickly and with limited, if any, discovery. Even if everything the policyholder says is true, the claim still fails if the insurance policy excludes coverage. Id. at *5. Thus, discovery and trial are unnecessary. Because the policyholder cannot successfully pursue policy coverage, the Court dismissed the action “with prejudice,” id. at *6, meaning that the policyholder will not be allowed to replead, and must seek further relief, if any, with an appellate court.

Unfortunately for small businesses, many efforts to obtain insurance coverage for Coronavirus-related losses have proven unsuccessful. Legislative fixes offer little help because the United States Constitution and the cognate provisions of the Florida Constitution would prevent the legislature from unilaterally altering the terms of insurance policies already in force. U.S. Const. Article I, Section 10 (“No State shall . . . pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts.”); and Fla. Const. Article I, Section 10 (“No bill of attainder, ex post facto law or law impairing the obligation of contracts shall be passed.”). Therefore, any Government intervention to provide business interruption coverage would come at the expense of the taxpayer, not the insurance companies.

A better solution for businesses attempting to mitigate losses stemming from Coronavirus would be avoidance of burdensome contracts that are no longer beneficial under a frustration of purpose theory. For example, commercial leases and supply contracts might be avoided under this doctrine. See, e.g., https://www.ansalaw.com/florida-appellate-decision-applies-frustration-of-purpose-to-terminate-lease/. Businesses saddled with improvident contracts should contact counsel for an evaluation of their case.

Michael P. Beltran is Counsel in our Florida office.