The Joseph Tambellini Restaurant in Pittsburgh, Pennsylvania recently filed an Emergency Application for Extraordinary Relief to the Pennsylvania Supreme Court pursuant to the Extraordinary jurisdiction statute of 42 Pa.C.S. § 726 and “King’s Bench Power” jurisdiction reserved for issues of immediate public importance asking the Court to rule on the question of insurance “coverage for losses, damages and expenses caused by the COVID-19 pandemic and the governmental Orders entered in connection therewith.” The petition did not suggest that the restaurant or any of its employees were exposed to Covid-19 and didn’t identify the particular coverages in the insurance contract under review.  Instead, the petition sought a declaration that the restaurant is covered under a policy of insurance for business income, extra expense, contamination, civil authority and other coverages.

Traditionally, the Pennsylvania Supreme Court has exercised these powers with extreme caution.  Generally, these powers are exercised to supplement existing procedural processes that had proven inadequate to carry out the judicial, administrative, or supervisory obligations of the Court in a manner that is expeditious and determinate or in civil rights matters.  The Pennsylvania Supreme Court has never exercised these powers to resolve insurance coverage questions, and on May 14, 2020, the Supreme Court declined to exercise Extraordinary jurisdiction or the King’s Bench Powers.  The matter will now return to the trial court and will proceed in the traditional manner.

Now that the Supreme Court has spoken, attention will return to the flurry of suits that have been filed in state and federal courts, mostly seeking recovery of business income losses arising from the Governor‘s Stay at Home Order.   The general coverage provision for loss of business income provides coverage for the actual loss of business income sustained due to the necessary suspension of operations during the period of restoration.  The coverage part will usually require that the suspension of operations be caused by a “direct physical loss or damage” to property.  A similar requirement of insured physical loss or damage is ordinarily required to trigger civil authority coverage.

The Pennsylvania Supreme Court has not defined “direct physical loss or damage.” The Pennsylvania Superior Court, the intermediate court of appeals, addressed the meaning of “direct” in the context of direct physical loss or damage in DiFabio v. Centaur Ins. Co., 531 A.2d 1141, 1144 (1987).  The Superior Court determined that “direct” means stemming from a source and “characterized by a close logical, causal or consequential relationship.”  The DiFabio court looked back at 1927 and 1946 opinions from the Proximate Supreme Court that direct means “proximate”. This decision raises the question of what loss is directly or proximately caused by Covid-19.  Can the mere threat of exposure cause a direct physical loss or damage?  These questions will require a fact intensive inquiry and will be analyzed on a case by case basis as opposed to a single decision from the Pennsylvania Supreme Court.