On Saturday, Judge Matthew Kennelly of the Northern District of Illinois hollowed out a complaint by a group of dental care providers against Massachusetts Bay Insurance Co. (MBIC), dismissing claims of breach of contract and bad faith related to the insurer’s alleged failure to reimburse costs incurred from COVID-19 shutdowns.
Fourteen affiliated dental practices from different parts of the country, led by Dental Experts LLC, banded together to file suit against MBIC to recover reimbursements to which they believe they are entitled. The plaintiffs alleged that the insurer contravened its responsibilities in its denial of claims by the plaintiffs after they lost revenue because of the March 2020 suspension of nonessential operations, including elective health care provisions such as dental work.
The defendant moved to dismiss 14 counts of the complaint, arguing that the plaintiffs failed to state claims upon which relief could be granted. Particularly, MBIC said the policy provisions invoked by the plaintiffs — business income, disease contamination, and civil authority — do not cover the losses that the plaintiffs seek to recover, which total more than $500,000 across the dental practices.
The court sided with the defendant on all of the claims, agreeing that the plaintiffs “did not suffer direct physical loss within the meaning of the policy” — a criterion for recovering the asserted losses — and that a “virus exclusion” in the policy bars the claims.
The virus exclusion in the policy clearly states that the insurer “will not pay for loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease.” Pursuant to this “plain and unambiguous” exclusion, even if the plaintiffs would have been able to show a direct physical loss, no claim for relief exists, the court found. On the bad faith claims, the court said these necessarily failed because no coverage for the asserted losses existed in the first place, so the plan contract could not have been made in bad faith.
The court’s dismissal of the breach of contract claims is with prejudice, effectively denying any leave to amend; the bad faith claims’ dismissals come with leave to amend to the extent they are concerned with disease contamination coverage.