Ungarean, T. v. CNA

J-E01002-22

2022 PA Super 204

TIMOTHY A. UNGAREAN, DMD D/B/A : IN THE SUPERIOR COURT OF

SMILE SAVERS DENTISTRY, PC, : PENNSYLVANIA

INDIVIDUALLY AND ON BEHALF OF A :

CLASS OF SIMILARLY SITUATED :

PERSONS :

:

:

v. :

: No. 490 WDA 2021

:

CNA AND VALLEY FORGE :

INSURANCE COMPANY :

:

Appellants :

Appeal from the Order Entered March 26, 2021

In the Court of Common Pleas of Allegheny County

Civil Division at No(s): GD-20-006544

TIMOTHY A. UNGAREAN, DMD D/B/A : IN THE SUPERIOR COURT OF

SMILE SAVERS DENTISTRY, PC, : PENNSYLVANIA

INDIVIDUALLY AND ON BEHALF OF A :

CLASS OF SIMILARLY SITUATED :

PERSONS :

:

:

v. :

: No. 948 WDA 2021

:

CNA AND VALLEY FORGE :

INSURANCE COMPANY :

:

Appellants :

Appeal from the Order Entered March 26, 2021

In the Court of Common Pleas of Allegheny County

Civil Division at No(s): GD-20-006544

BEFORE: PANELLA, P.J., BENDER, P.J.E., BOWES, J., LAZARUS, J., STABILE,

J., KUNSELMAN, J., NICHOLS, J., McLAUGHLIN, J., and KING, J.

OPINION BY PANELLA, P.J.: FILED: NOVEMBER 30, 2022

J-E01002-22

Like so many other businesses, the dental practice of Timothy Ungarean,

DMD, d/b/a Smile Savers Dentistry, PC (“Ungarean”) suffered significant

losses when business was disrupted by the COVID-19 pandemic. Ungarean

sought coverage for those losses under the business interruption provisions

of the business insurance policy he had bought from CNA and Valley Forge

Insurance Company (“CNA”) (“CNA Policy”). After CNA denied his claim,

Ungarean filed a complaint seeking a declaration under the Declaratory

Judgments Act, 42 Pa.C.S.A. §§ 7531-7541, that the CNA Policy covered his

loss. Ungarean followed that complaint with a motion for summary judgment,

which the Allegheny County Court of Common Pleas granted. The court

declared Ungarean was entitled to business interruption coverage because

COVID-19 and the related governmental orders had caused Ungarean to suffer

a direct physical loss of his dental practice, which was within the ambit of

coverage provided by the CNA Policy. Moreover, the court found that the

exclusions CNA tried to invoke to deny coverage were not applicable to

Ungarean’s claim.

We are in full agreement with the court’s conclusions. We are also in full

agreement with the court’s reasoning in support of those conclusions.

Therefore, based primarily on the trial court’s thoughtful opinion, we affirm

the court’s order granting summary judgment and declaring that coverage is

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owed to Ungarean for his COVID-related business losses under the specific

terms of the CNA Policy.1

The bulk of the factual background leading to this appeal is

uncontroverted. Ungarean owns and operates a dental practice, with an office

in Pittsburgh and an office in Aliquippa. The practice of dentistry necessarily

requires close contact not only between the dentist and his patients, but also

between the patients and various staff at the office.

To protect himself from unforeseen interruptions of his practice,

Ungarean procured an insurance policy from CNA that provided coverage for

certain losses associated with the dental practice during the year from April 1,

2019, to April 1, 2020. In March 2020, the state of Pennsylvania was struck

by the full force of the COVID-19 pandemic. COVID-19 is a novel contagious

virus that can cause severe acute respiratory illness. In the first three months

of the pandemic, it killed thousands of Pennsylvanians, and over 100,000

people nationwide.

After consulting with public health experts, Governor Tom Wolf issued

several orders in March 2020 directing that all non-essential businesses should

close until further notice. Further, the Governor issued an order directing the

residents of Allegheny County, which contains the city of Pittsburgh, to stay

at home.

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1 Given our reliance on the trial court’s opinion, we have attached a copy of

that opinion to this one.

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In addition to these shutdown orders, public health officials

implemented masking and social distancing protocols. Even those businesses

that were deemed essential were required to modify their business models by

decreasing the number of people allowed in buildings and requiring people to

remain masked. Furthermore, in these early months, enhanced cleaning

protocols were implemented due to fears that the virus could linger for days

on hard surfaces.

As a result of the pandemic, Ungarean was forced to close his dental

practice to the public except for emergency dental procedures. He claims this

caused a drastic loss in income from the practice, causing him to furlough

employees and suffer other harmful consequences. As a result, Ungarean filed

a claim with CNA for these losses under the CNA Policy which provides

coverage for, inter alia, loss of business income due to the physical loss of or

damage to covered property. CNA denied coverage on the basis that

Ungarean’s dental practice did not suffer physical damage.

Ungarean filed a class action complaint asserting one count of relief

under the Declaratory Judgments Act. See Complaint, 6/5/20, at ¶ 77. In

essence, Ungarean sought a declaration that his pandemic-related business

losses were covered under the CNA Policy’s Business Income, Extra Expense

and Civil Authority provisions. See id. at ¶¶ 7, 31, 34. Ungarean subsequently

filed a motion for summary judgment, which the trial court granted on the

basis that Ungarean had, in fact, suffered a direct physical loss of his dental

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practice and was therefore owed business insurance coverage under the

policy.2 CNA filed a timely notice of appeal and raises two issues:

1.Whether [Ungarean] is entitled to business insurance coverage

under the [CNA Policy] as a result of the Covid-19 pandemic and

associated orders issued by Governor Wolf where [Ungarean] did

not suffer “direct physical loss of or damage to” property and no

order, issued as a result of “direct physical loss of or damage to”

property, prohibited access to [Ungarean’s] property, which are

required to trigger coverage under the policy?

2. Whether the Contamination, Consequential Loss, Fungi, Wet

Rot, Dry Rot, and Microbes, and Acts of Decisions, Ordinance or

Law exclusions in the [CNA Policy] bar coverage for [Ungarean’s]

alleged losses related to the Covid-19 pandemic and associated

orders issued by Governor Wolf?

Brief for Appellant at 2 (trial court’s answers and suggested answers omitted).

At the core, CNA challenges the trial court’s declaration under the

Declaratory Judgments Act that Ungarean was entitled to coverage under the

CNA Policy. “The purpose of the Declaratory Judgments Act is to settle and to

afford relief from uncertainty and insecurity with respect to rights, status, and

other legal relations[.]” Allen, 692 A.2d at 1092-93. “In reviewing a

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2 The same order denied the cross-motion for summary judgment that CNA

had also filed. Normally, the denial of a motion for summary judgment is not

a final order and therefore is not immediately appealable as a collateral order.

See Pa.R.A.P. 341. However, in the context of an action under the Declaratory

Judgments Act, the trial court’s order denying CNA’s motion for summary

judgment is part and parcel of its order declaring that Ungarean was entitled

to coverage under his insurance policy with CNA. Therefore, both the grant of

summary judgment to Ungarean and the denial of summary judgment to CNA

constitute final orders in this matter. See Gen. Acc. Ins. Co. of America v.

Allen, 692 A.2d 1089, 1095 (Pa. 1997). Historically, courts often resolve

insurance coverage disputes under the Declaratory Judgments Act through

summary judgment. See Kline v. Travelers Pers. Sec. Ins. Co., 223 A.3d

677, 685 (Pa. Super. 2019).

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declaratory judgment action, we are limited to determining whether the trial

court clearly abused its discretion or committed an error of law.” Kline, 223

A.3d at 684. We review the trial court’s decision “as we would a decree in

equity.” Id. As such, we defer to the factual findings of the trial court unless

they are unsupported in the record. See id. In contrast, we give no such

deference to the trial court’s application of the law. See id.

In this action, Ungarean sought to settle whether the CNA Policy covered

his losses arising from the COVID-19 pandemic. This presents a question of

law for our review. See Kramer v. Nationwide Prop. and Casualty Ins.

Co., 271 A.3d 431, 436 (Pa. Super. 2021). In conducting that review, we are

mindful that “disputes over coverage must be resolved only by reference to

the provisions of the policy itself.” Id. (citation omitted). It is therefore

imperative that we look to the text of the CNA Policy, because just as in every

case in which an insured claims business related losses caused by COVID-19,

each individual policy must be examined based solely on its own language.

Business Income and Extra Expense Provisions

The trial court first found that Ungarean was entitled to coverage under

the CNA Policy’s Business Income and Extra Expense provisions, which state

in relevant part:

1.b. We will pay for the actual loss of Business Income you sustain

due to the necessary “suspension” of your “operations during the

“period of restoration.” The “suspension” must be caused by direct

physical loss of or damage to property at the described premises.

The loss or damage must be caused by or result from a Covered

Cause of Loss. …

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2.a. Extra Expense means reasonable and necessary expenses

you incur during the “period of restoration” that you would not

have incurred if there had been no direct physical loss of or

damage to property caused by or resulting from a Covered Cause

of Loss.

CNA Policy, Business Income and Extra Expense Endorsement, at 1.b., 2a.

The policy defines “suspension” as “[t]he partial or complete cessation of your

business activities; or … [t]hat a part or all of the described premises is

rendered untenantable.” CNA Policy, Businessowners Special Property

Coverage Form, at G.29. Further, the policy defines “operations” as “the type

of your business activities occurring at the described premises and

tenantability of the described premises.” Id., at G.19.

“Direct physical loss of or damage to”

The provisions provide coverage for the loss of business income and

extra expenses incurred due to the suspension of an insured’s operations

caused by a “direct physical loss of or damage to” the covered property. See

CNA Policy, Business Income and Extra Expense Endorsement, at 1.b., 2a. As

the trial court makes clear, whether Ungarean’s claim is covered under these

provisions of the CNA Policy hinges on the meaning of the phrase “direct

physical loss of or damage to property.” Trial Court Opinion, 3/25/21, at 10.

CNA argues that the phrase necessarily requires a physical alteration to the

subject property, and any other interpretation is unreasonable. Ungarean,

meanwhile, argues that it is reasonable to interpret the phrase as

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encompassing the loss of use of the property even in the absence of actual

physical harm to the property.

Importantly, the CNA Policy does not define “direct,” “physical,”

“damage,” and, perhaps most significantly in our view, “loss.” The trial court

therefore turned to the dictionary definitions of these words to determine

whether Ungarean’s interpretation of the phrase as including the loss of use

of his property was a reasonable one. See Wagner v. Erie Ins. Co., 801 A.2d

1226, 1231 (Pa. Super. 2002) (stating that courts may utilize dictionary

definitions to inform its understanding of the language of a contract). The

court emphasized that this determination was crucial because “if the

contractual terms are subject to more than one reasonable interpretation,

[the] [c]ourt must find that the contract is ambiguous,” and ambiguous

provisions must be construed in favor of Ungarean as the insured. Trial Court

Opinion, 3/25/21, at 10-11 (citing Madison Constr. Co. v. Harleysville

Mutual Ins. Co., 735 A.2d 100, 106 (Pa. 1999), and Kurach v. Truck Ins.

Exchange, 235 A.3d 1106, 1116 (Pa. 2020)). Ungarean’s interpretation of an

ambiguous contract need only be reasonable to be controlling. See Collister

v. Nationwide Life Ins. Co., 388 A.2d 1346, 1353 (Pa. 1978); see also

Consol. Rail Corp. v. ACE Prop. & Casualty Ins. Co., 182 A.3d 1011, 1026

(Pa. Super. 2018).

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In finding that Ungarean’s interpretation was, at the very least,

reasonable considering the ordinary meaning of the operative words, the trial

court explained:

This [c]ourt [begins] its analysis [of what the phrase ‘direct

physical loss of …. property’ reasonably means] with the terms

‘damage’ and ‘loss,’ as these terms are the crux of the disputed

language. … ‘[D]amage’ is defined as ‘loss or harm resulting from

injury to person, property, or reputation…’ and ‘loss’ is defined as

‘DESTRUCTION, RUIN …[and/or] the act of losing possession

[and/or] DEPRIVATION…

Based upon the above-provided definitions, it is clear that

‘damage’ and ‘loss,’ in certain contexts, tend to overlap. This is

evident because the definition of ‘damage’ includes the term ‘loss,’

and at least one definition of ‘loss’ includes the terms ‘destruction’

and ‘ruin,’ both of which indicate some form of damage. However,

[ ] in the context of this [CNA Policy], the concepts of ‘loss’ and

‘damage’ are separated by the disjunctive ‘or,’ and, therefore, the

terms must mean something different from each other.

Accordingly, in this instance, the most reasonable definition of

‘loss’ is one that focuses on the act of losing possession and/or

deprivation of property instead of one that encompasses various

forms of damage to property, i.e., destruction and ruin. Applying

this definition gives the term ‘loss’ meaning that is different from

the term ‘damage.’ Specifically, whereas the meaning of the term

‘damage’ encompasses all forms of harm to [Ungarean’s] property

(complete or partial), this [c]ourt conclude[s] that the meaning of

the term ‘loss’ reasonably encompasses the act of losing

possession [and/or] deprivation, which includes the loss of use of

property absent any harm to [the] property.

Trial Court Opinion, 3/25/21, at 12-13 (capitalization and some ellipses in

original, footnotes citing Merriam-Webster Dictionary for definitions of terms

omitted).

The trial court’s reasoning is both straightforward and compelling. The

CNA Policy provides coverage for “direct physical loss of or damage to the

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property. . . .” CNA, as the insurer, wrote that phrase in the disjunctive,

meaning that “direct physical loss” must mean something different from

“direct physical damage.” See In re Paulmier, 937 A.2d 364, 373 (Pa. 2007)

(stating that “’or’ is disjunctive. It means one or the other of two or more

alternatives.”). The definition of “loss” includes the loss of possession or

deprivation of the property, whereas damage does not; it is therefore

reasonable to find that “loss of property” includes the act of being deprived of

the physical use of one’s property. We are convinced the trial court’s reasoning

is correct, and results in a reasonable interpretation of the CNA Policy. See

Collister, 388 A.2d at 1353; Consol. Rail Corp., 182 A.3d at 1026.

CNA argues, however, that the trial court’s analysis is fatally flawed

because it writes the words “physical” and “direct” out of the contract. To the

contrary, the trial court explained that it had:

also considered the meaning and impact of the terms ‘direct’ and

‘physical.’ Ultimately, [the court] determined that the ordinary,

dictionary definitions of the terms ‘direct’ and ‘physical’ are

consistent with the above interpretation of the term ‘loss.’ …

‘[D]irect’ is defined as ‘proceeding from one point to another in

time or space without deviation or interruption … [and/or]

characterized by close logical, causal, or consequential

relationship …’ and ‘physical’ is defined as ‘of or relating to natural

science … having a material existence … [and/or] perceptible

especially through the senses and subject to the laws of nature….’

Based upon these definitions it is certainly reasonable to conclude

that [Ungarean] could suffer ‘direct’ and ‘physical’ loss of use of

[his] property absent any harm to [the] property.

Here, [Ungarean’s] loss of use of [his] property was both

‘direct’ and ‘physical.’ The spread of COVID-19, and a desired

limitation of the same, had a close logical, causal and/or

consequential relationship to the ways in which [Ungarean]

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materially utilized [his] property and physical space. … Indeed,

the spread of COVID-19 and social distancing measures (with or

without the Governor’s orders) caused [Ungarean], and many

other businesses, to physically limit the use of property and the

number of people that could inhabit physical buildings at any given

time. Thus, the spread of COVID-19 did not, as [CNA] contend[s],

merely impose economic limitations. Any economic losses were

secondary to the businesses’ physical losses.

Trial Court Opinion, 3/25/21, at 13-14 (emphasis and some ellipses in original,

footnotes citing Merriam-Webster Dictionary for definitions of terms omitted).

We agree with the trial court that it is, at a minimum, reasonable to find

that Ungarean’s loss of the use of his dental practice due to COVID-19 and

the governmental orders equated to a direct physical loss of his property. See

Collister, 388 A.2d at 1353; Consol. Rail Corp., 182 A.3d at 1026. In fact,

to say otherwise not only ignores the reality of the impact COVID-19 had on

businesses and the world at large but ignores the dictionary definitions of the

words in the CNA Policy which, as written, reasonably encompass the direct

physical loss of the use of one’s property due to COVID-19 and the physical

restrictions placed on properties because of it.3

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3 Although not applicable here, another way insureds may demonstrate that

they have satisfied the “direct physical loss or damage” to covered property

is by invoking the contamination theory so aptly explained by another well-

reasoned trial court opinion in SWB Yankees v. CNA Fin. Corp., 2021 WL

3468995 (Lackawanna Ct. Com. Pl. August 4, 2021). There, the court

explained that if an insured alleges the actual presence of COVID-19 on its

property caused the property to become uninhabitable or unusable, it has

“adequately alleged ‘physical loss or damage’ to its property under the

contamination theory for purposes of business interruption insurance

coverage. Id. at *21. Ungarean did not allege that COVID-19 was present in

his dental practice.

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Period of Restoration

CNA points out, however, that the Business Income and Extra Expense

provisions state that CNA will pay for actual loss or reasonable and necessary

expenses during the “period of restoration.” CNA asserts the definition of

“period of restoration” in the policy only lends support to its argument that

“physical loss or damage” requires a physical alteration to the property and

because that did not happen here, Ungarean did not suffer a direct physical

loss of his dental practice. The policy defines “period of restoration” as:

the period of time that … [b]egins with the date of direct physical

loss or damage caused by or resulting from any Covered Cause of

Loss at the described premises; and … [e]nd on the earlier of …

[t]he date when the property at the described premises should be

repaired, rebuilt or replaced with reasonable speed and similar

quality; or … [t]he date when business is resumed at a new

permanent location.

Period of restoration does not include any increased period

required due to the enforcement of any law that … [regulates the

construction, use or repair, or requires the tearing down of any

property ; or … [r]egulates the prevention, control, repair, clean-

up or restoration of environmental damage.

The expiration date of this policy will not cut short the “period of

restoration.”

CNA Policy, Businessowners Special Property Coverage Form, at G.20.

In rejecting CNA’s argument, the trial court concluded that the “period

of restoration” provisions are most reasonably construed as time limits for

coverage, and do not otherwise alter the definition of “physical loss or

damage.” See Trial Court Opinion, 3/25/21, at 15. We agree and are therefore

unpersuaded by CNA’s argument that the definition of “period of restoration”

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should somehow alter our conclusion that Ungarean suffered a physical loss

to his dental practice and is consequently entitled to coverage.4

“Covered Cause of Loss”

This does not, however, end our analysis as the CNA Policy also states

that “[t]he loss or damage must be caused by or result from a Covered Cause

of Loss.” CNA Policy, Business Income and Extra Expense Endorsement, at

1.b.; see also id. at 2.a. (“Extra Expense means reasonable and necessary

expenses you incur during the ‘period of restoration’ that you would not have

incurred if there had been no direct physical loss of or damage to property

caused by or resulting from a Covered Cause of Loss.”). The CNA Policy defines

“Covered Causes of Loss” as follows: “RISKS OF DIRECT PHYSICAL LOSS

unless the loss is: a. Excluded in section B. EXCLUSIONS; b. Limited in

paragraph A.4. Limitations; or c. Excluded or limited by other provisions of

this policy.” CNA Policy, Businessowners Special Property Coverage Form, at

A.3. (emphasis in original).

Here, CNA does not raise any argument related to Paragraph A.4 or

indicate that the loss was excluded or limited under other provisions of the

CNA Policy. Instead, CNA points to a variety of exclusions in Section B of the

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4 Furthermore, as the trial court noted, COVID-19 has necessitated many

physical changes to business properties that would constitute repairs or

rebuilding. See id. at 15-16. “Such changes include, but are not limited to,

the installations of partitions, additional handwashing/sanitization stations,

and the installations or renovation of ventilation systems.” Id. at 15.

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CNA Policy and maintains each of these exclusions relieves it of any obligation

to cover Ungarean’s lost business income and extra expenses from the

pandemic-related loss of his dental practice. These exclusions include

contamination; consequential loss; fungi, wet rot, dry rot, and microbes;

ordinance or law; government actions; and acts or decisions.

It is well settled that when the insurer relies upon exclusionary language

in the policy as a defense, the burden is upon the insurer to prove that

the exclusion applies to the facts of the case. See McEwing v. Lititz Mut.

Ins. Co., 77 A.3d 639, 646 (Pa. Super. 2013) (stating that the insured has

the initial burden of showing a claim falls within a policy’s coverage, but the

burden then shifts to the insurer to prove the applicability of any exclusions);

Wagner, 801 A.2d at 1231 (providing that the insurer must show that an

asserted exclusion clearly and unambiguously prevents the coverage of a

claim). To sustain that burden, CNA “must prove that the language of the

insurance contract is clear and unambiguous; otherwise, the provision will be

construed in favor of the insured.” Wagner, 801 A.2d at 1231. Importantly,

insurance coverage is interpreted broadly to afford the greatest possible

protection to the insured; concomitantly, exclusionary clauses are interpreted

narrowly against the insurer. See Kropa v. Gateway Ford, 974 A.2d 502,

505-07 (Pa. Super. 2009); Pecorara v. Erie Ins. Exch., 596 A.2d 237, 239

(Pa. Super. 1991).

Ambiguity in Exclusions Provisions

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As a preliminary matter, the parties acknowledge that Ungarean seeks

coverage under the CNA Policy’s Business Income and Extra Expense

provisions. The CNA Policy’s stated exclusions include four distinct categories

of exclusions. See CNA Policy, Businessowners Special Property Coverage

Form, at B.1.-4. CNA cites to exclusions in the first three categories and wholly

ignores that the fourth category expressly limits its application to “Business

Income and Extra Expense Exclusions.” Id. at B.4.

As noted above, when a claim is made under the CNA Policy, coverage

under the Business Income and Extra Expense insurance is restricted to

situations where “[t]he loss or damage [is] caused by or result from a Covered

Cause of Loss.” CNA Policy, Business Income and Extra Expense Endorsement,

at 1.b., 2.a. “Covered Cause of Loss” broadly cites to Section B. (Exclusions)

and does not differentiate between the four categories of Exclusions. See CNA

Policy, Businessowners Special Property Coverage Form, at A.3.

However, based upon the language in the CNA Policy, an insured, such

as Ungarean, could reasonably conclude that the Business Income and Extra

Expense Exclusions, as stated in the fourth category, and not the first three

categories of exclusions, are the only exclusions which apply to claims under

the Business Income and Extra Expense coverage provisions. CNA’s

contention that all four of the categories of exclusions apply to claims for

Business Income and Extra Expense insurance, based upon the definition of

“Covered Cause of Loss” and its broad statement citing to Section B.

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(Exclusions) as a whole, is unreasonable when considering the express words

of the policy. In fact, CNA’s interpretation would mean that the inclusion of

the words “Business Income and Extra Expense Exclusions” in the CNA Policy

was entirely superfluous, amounting to no more than mere surplusage. See

CNA Policy, Businessowners Special Property Coverage Form, at B.1.-4;

Millers Capital Ins. Co. v. Gambone Bros. Dev. Co., 941 A.2d 706, 716

(Pa. Super. 2007) (stating that when courts must choose between two

competing interpretations of an insurance policy, “we are bound, as a matter

of law, to choose the interpretation which allows us to give effect to all of the

policy’s language). Such inconsistent language used in relation to different

identified forms of exclusions, covered under different provisions of the CNA

Policy, necessarily creates an ambiguity in the policy. See Bishops, Inc. v.

Penn Nat. Ins., 984 A.2d 982, 992 (Pa. Super. 2009) (finding an ambiguity

in an insurance policy based upon contradictory or necessarily inconsistent

language in different portions of the policy).

Here, Ungarean purchased the CNA Policy, which provided him with two

categories of property insurance—Businessowners Covered Property

insurance and Business Income and Extra Expense insurance. Ostensibly, if

Ungarean sought coverage under the Businessowners Covered Property

insurance, the first three categories of Exclusions would be applicable, but by

the plain language of the CNA Policy, the “Business Income and Extra Expense

Exclusions” would be inapplicable. Moreover, only with the inclusion of a claim

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for loss of business income would the fourth category of exclusions —

“Business Income and Extra Expense Exclusions”— be triggered.

When insurance policy language is ambiguous, courts examine whether

a finding of coverage is consistent with the objectively reasonable

expectations of the insured. See id. at 990. In making this determination,

courts must examine the totality of the disputed policy language. See id.

When viewing the CNA Policy as a whole, and keeping in mind that we

must interpret the relevant provisions in favor of the insured and read the

exclusionary clauses narrowly against the insurer, we find that the only

exclusion applicable to Ungarean’s Business Income and Extra Expense

insurance claim is the provision for “Business Income and Extra Expense

Exclusions”.5

The CNA Policy defines “Business Income and Extra Expense Exclusions”

as follows:

a. We will not pay for:

(1) Any Extra Expense, or increase of Business Income loss,

caused by or resulting from:

(a) Delay in rebuilding, repairing or replacing the property

or resuming “operations,” due to interference at the location

of the rebuilding, repair or replacement by strikers or other

persons; or

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5Although neither party cites to this exclusion, it is well settled that the insurer

bears the burden to establish the applicability of any exclusion to deny

coverage. See McEwing, 77 A.3d at 646.

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(b) Suspension, lapse or cancellation of any license, lease

or contract. But if the suspension, lapse or cancellation is

directly caused by the suspension of “operations,” we will

cover such loss that affects your Business Income during

the “period of restoration.”

b. Any other consequential loss.

CNA Policy, Businessowners Special Property Coverage Form, at B.4.

Here, subsection a. is clearly inapplicable to the facts of this case.

Regarding subsection b. — “Any other consequential loss”— the CNA Policy in

a separate exclusion defines “consequential loss” as “[d]elay, loss of use or

loss of market.” CNA Policy, Businessowners Special Property Coverage Form,

at B.2.b.

If we were to find that subsection b. of the “Business Income and Extra

Expense Exclusions” is applicable to this case, we would necessarily vitiate

Business Income and Extra Expense coverage in its entirety. See Trial Court

Opinion, 3/25/21, at 28. Here, as explained above, the CNA Policy can

reasonably be interpreted to find that the “loss of property” includes the act

of being deprived of the physical use of one’s property. Accordingly, the

consequential loss exclusion “would effectively eliminate coverage for any kind

of loss and/or damage caused by any covered peril.” Id. Given this result, we

cannot conclude that the exclusion for consequential loss under the “Business

Income and Extra Expense Exclusions” is applicable so as to prevent coverage.

Based on all of the above, we find that the loss in this case is a “Covered

Cause of Loss” as specified in the CNA Policy as none of the exclusions in the

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Business Income and Extra Expenses Exclusions category, the only category

of Exclusions available to CNA for the Business Income and Extra Expense

claim made here, is applicable.

Other Exclusions Under Section B

Nevertheless, even if we were to address CNA’s arguments regarding

the exclusions in the first three categories of Section B. (Exclusions), we agree

with the trial court that none of the cited exclusions apply. First, CNA argues

the “Contamination by other than pollutants” exclusion applies to the instant

case. See Brief for Appellant at 38-39. CNA contends this exclusion applies to

any loss resulting from contamination, including mitigation efforts. See id. at

38. CNA claims that the losses here are an “indirect” result of COVID-19

contamination. See id. at 39.

The contamination exclusion in the CNA Policy precludes coverage for

“Contamination by other than pollutants.” CNA Policy, Businessowners Special

Property Coverage Form, at B.2.d.8. In turn, the CNA Policy defines

“pollutants” as follows:

any solid, liquid, gaseous or thermal irritant or contaminant,

including smoke, vapor, soot, fumes, acids, alkalis, chemicals,

waste, and any unhealthy or hazardous building materials

(including but not limited to asbestos and lead products or

materials containing lead). Waste included material to be

recycled, reconditioned, or reclaimed.

Id., at G.21.

As an initial matter, the contamination exclusion contains an ambiguity,

given that it seeks to exclude pollutants while at the same time including

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“contaminant” in the definition of pollutants. See Wagner, 801 A.2d at 1231

(stating that an ambiguity in the insurance policy must be construed against

the insurer). However, setting aside this ambiguity, we agree with the trial

court that this exclusion does not apply, and adopt its reasoning supporting

that conclusion in full. See Trial Court Opinion, 3/25/21, at 21-24.

Furthermore, CNA has not established, through any pertinent case law, that

an “indirect” connection between the exclusion and the loss renders the

exclusion applicable. As noted above, Ungarean neither alleged nor introduced

evidence that the COVID-19 virus was present at the dental offices.

Accordingly, we reject CNA’s contention that the “Contamination by other than

pollutants” exclusion prevents coverage of Ungarean’s claim.

Next, CNA argues that the consequential loss exclusion applies. See

Brief for Appellant at 39-41. CNA claims the trial court misinterpreted this

exclusion by finding that the exclusion would render the Business Income and

Extra Expense coverages illusory. See id. at 39-40. To that end, CNA contends

that when the trigger for coverage includes a tangible change to the property,

and not mere loss of use, the exclusion is not illusory and reinforces its

position that a “non-tangible loss of use was never intended to be covered

under the policy.” Id. at 40. In support, CNA cites to various cases interpreting

similar language. See id. at 40-41.

Given that we have rejected CNA’s underlying argument that Ungarean

did not suffer a direct physical loss to his dental practices, we likewise reject

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this contention which is premised on that underlying argument. Moreover, we

do not find any of the cases cited by CNA to be availing, as the “loss of

property” language in the CNA Policy, unlike the policies in the cited cases,

includes the act of being deprived of the physical use of one’s property.

Therefore, we also find that the consequential loss exclusion is not applicable.

Next, CNA contends that the “fungi, wet rot, dry rot, and microbes”

exclusion applies to this case. See Brief for Appellant at 42-43. CNA argues

that the trial court’s interpretation of the exclusion is tortured and

manufactures an ambiguity. See id.

We disagree. To the contrary, we agree with the trial court that the

exclusion does not apply to the facts of this case and adopt its analysis in full.

See Trial Court Opinion, 3/25/21, at 24-26. We add that CNA’s argument that

the trial court manufactured an ambiguity is without merit, given that the CNA

Policy defines “microbe” but fails to include virus in this definition. See

Wagner, 801 A.2d at 1231 (stating that when construing an insurance policy,

courts must construe words of common usage in their natural, plain, and

ordinary sense and may inform the understanding of these terms by

accounting for their dictionary definitions).6 Based upon the foregoing, CNA

has not met its burden of establishing that this exclusion is applicable.

____________________________________________

6 The CNA Policy at issue here does not contain a virus exclusion. If it had,

such an exclusion would most likely have ended our inquiry and compelled a

conclusion different from the one reached by the trial court and affirmed by

this Court.

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CNA also attempts to invoke the “Ordinance or Law” exclusion. See Brief

for Appellant at 44-45. CNA asserts that Governor Wolf’s COVID-19 orders

had the force of law and exclude coverage under that exclusion. See id.

The exclusion states the following:

a. Ordinance or Law

(1) The enforcement of any ordinance or law:

(a) Regulating the construction, use or repair of any

property; or

(b) Requiring the tearing down of any property, including

the cost of removing its debris.

(2) This exclusion applies whether the loss results from:

(a) An ordinance or law that is enforced even if the

property has not been damaged; or

(b) The increased costs incurred to comply with an

ordinance or law in the course of construction, repair,

renovation, remodeling or demolition of property, or

removal of its debris, following a physical loss to that

property.

CNA Policy, Businessowners Special Property Coverage Form, at 1.a.

The inclusion of “construction” and “repair” with “use” indicates “that

the exclusion relates to the physical structural integrity of the property.”

Frank Van’s Auto Tag, LLC v. Selective Ins. Co. of the Se., 516 F. Supp.

3d 450, 461 (E.D. Pa. 2021); see also Elegant Massage, LLC v. State Farm

Mut. Auto. Ins. Co., 506 F. Supp. 3d 360, 380 (E.D. Va. 2020) (“[I]t is clear

that the Ordinance or law Exclusion applies to ordinances related to the

structural integrity, maintenance, construction, or accessibility due to the

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property’s physical structural state, which existed before.”) (emphasis in

original).7 Here, the physical structural integrity of the properties is not at

issue and, thus, the narrow application of this exclusion is unavailable to CNA.

In any event, even if CNA could establish that “use” in the exclusion

applies to this case, we agree with the trial court that Ungarean’s claim “for

coverage is based upon losses and expenses [he] suffered in relation to both

‘the Covid-19 pandemic and the actions of the government in response

thereto.’” Trial Court Opinion, 3/25/21, at 29 (emphasis omitted). It was

“COVID-19 and the related social distancing measures (with or without

government orders) [which] directly forced businesses everywhere to

physically limit the use of property and the number of people that could inhabit

physical buildings at any given time.” Id. Accordingly, the Ordinance or Law

exclusion is not available to CNA on this basis as well.

Finally, CNA baldly raises a claim that the Acts or Decisions and

Governmental Actions exclusions are applicable. See Brief for Appellant at 44.

The Acts or Decisions exclusion states that the insurer “will not pay for

loss or damage caused by or resulting from … acts or decisions, including the

failure to act or decide, of any person, group, organization or governmental

____________________________________________

7 Such an interpretation is seemingly confirmed by the “Ordinance or Law”

endorsement, which states that “[t]he ordinance or law referred to in this

Additional Coverage is an ordinance or law that … [r]egulates the demolition,

construction or repair of buildings, or establishes zoning or land use

requirements at the described premises; and … [i]s in force at the time of the

loss.” CNA Policy, Ordinance or Law, at 2 (emphasis added).

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body.” CNA Policy, Businessowners Special Property Coverage Form, at B.3.b.

Pertinently, if the excluded cause of loss listed in paragraph b. “results in a

Covered Cause of Loss, [CNA] will pay for the loss or damage caused by that

Covered Cause of Loss.” Id.

The plain language of this exclusion conflicts with the definition of

Covered Cause of Loss. As noted above, the CNA Policy defines “Covered

Causes of Loss” as follows:

RISKS OF DIRECT PHYSICAL LOSS unless the loss is:

a. Excluded in section B. EXCLUSIONS;

b. Limited in paragraph A.4. Limitations; or

c. Excluded or limited by other provisions of this policy.

Id., at A.3. By the plain language of the CNA Policy, a loss cannot be a Covered

Cause of Loss if an exclusion in Section B. applies. However, the Acts or

Decisions exclusion will cover an excluded loss if the loss is a Covered Cause

of Loss. These two sections are in conflict, as a loss excluded by the Acts or

Decisions exclusion would never qualify as a Covered Cause of Loss.

Accordingly, the exclusion contains an ambiguity and therefore cannot be used

by CNA to deny Ungarean coverage.

Moreover, the Governmental Actions exclusion denies coverage for “loss

or damage caused directly or indirectly by … destruction of property by order

of government authority.” Id., at B.1.c. Here, the Governmental Actions

exclusion does not apply because no governmental authority ordered the

destruction of Ungarean’s properties.

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In sum, as for the exclusions, we find in the first instance that the

ambiguity created by Section B. Exclusions means only the fourth category of

exclusions, under the heading of “Business Income and Extra Expense

Exclusions,” is available for CNA to invoke against Ungarean’s claim under the

Business Income and Extra Expense provisions. None of those exclusions are

applicable to Ungarean’s claim. Nonetheless, even if the exclusions under the

three other Exclusions sections not labeled “Business Income and Extra

Expense Exclusions” were available to CNA, we agree with the trial court that

those exclusions are also not applicable and cannot absolve CNA of its

responsibility to provide coverage for Ungarean’s losses.

Therefore, we conclude that the trial court properly declared that CNA

was obligated to provide business loss and extra expenses coverage to

Ungarean for the direct physical loss of his dental practice that he suffered

due to COVID-19 and the governmental orders issued in response to the

pandemic.

Civil Authority Provision

The trial court also found that Ungarean was entitled to coverage under

the Civil Authority Provision in the CNA Policy, which states:

When the Declarations show that you have coverage for Business

Income and Extra Expense, you may extend that insurance to

apply to the actual loss of Business Income you sustain and

reasonable and necessary Extra Expense you incur caused by

action of civil authority that prohibits access to the described

premises. The civil authority action must be due to direct physical

loss of or damage to property at locations, other than described

premises, caused by or resulting from a Covered Cause of Loss.

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CNA Policy, Civil Authority, at 1.

As we agree with the trial court that Ungarean has established a claim

that he suffered a “physical loss of or damage to covered property,” we also

agree with the trial court that he has established a claim under the Civil

Authority Endorsement. See Trial Court Opinion, 3/25/21, at 19-20.

Conclusion

We affirm the trial court’s order granting Ungarean’s motion for

summary judgment and its declaration that Ungarean’s direct physical loss to

his dental practice is covered by the CNA Policy. We recognize, as CNA has

taken great pains to point out, that this conclusion runs against the tide of

cases finding an insured was not owed COVID-related business interruption

coverage under their policy’s provisions. However, as we stressed above, our

review must be confined to the CNA policy purchased by Ungarean to

determine whether coverage has been triggered. We base our finding that

coverage has indeed been triggered on the plain language of the CNA policy,

the guiding principle that ambiguities in insurance policies such as the ones

we identified in the CNA Policy must be construed in favor of the insured, and

the analysis and opinion of the trial court.

Order affirmed.

Judges Lazarus, Kunselman, Nichols, and McLaughlin join the Opinion.

Judge Stabile files a dissenting opinion in which President Judge

Emeritus Bender, and Judges Bowes and King join.

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Judgment Entered.

Joseph D. Seletyn, Esq.

Prothonotary

Date: 11/30/2022

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