eNotes: Liability – July 2022 – Maryland

SIGNIFICANT CASE SUMMARIES

MD CASE SUMMARY

GPL Enter., LLC v. Certain Underwriters at Lloyd’s
Maryland Court of Special Appeals
No. 302, September Term, 2021

Decided: May 24, 2022

Maryland Court of Special Appeals holds that a commercial property insurance policy does not cover business interruption losses resulting from the COVID-19 virus or from an emergency order of the Governor that suspended indoor service at restaurants and bars during the pandemic.

Background

In March of 2020, the Governor of Maryland issued an emergency order indefinitely closing all Maryland restaurants and bars in response to the COVID-19 pandemic. GPL Enterprise, LLC, which operates a restaurant known as The Anchor Bar, suffered significant losses as a result of the Governor’s Order. GPL held an insurance policy from a syndicate of underwriters at Lloyd’s. This policy provided business interruption coverage, which covered loss of business income and expenses due to the suspension of business operations, provided that the suspension was “caused by direct physical loss or of damage to property” at the restaurant. The policy also covered business interruption losses if a civil authority prohibited access to the restaurant as a result of damage to property other than the restaurant, such as an adjacent property. GPL demanded coverage under the policy, which Lloyd’s denied.

GPL filed suit against Lloyd’s in the Circuit Court for Frederick County, claiming breach of contract and seeking a declaratory judgment. Lloyd’s filed a Motion to dismiss, claiming that there was no coverage under the policy because GPL had suffered no direct physical loss or damage to its restaurant and that the Governor’s order had not prohibited access to the restaurant as a result of damage to other nearby property. The Circuit Court granted Lloyd’s Motion to dismiss, finding that GPL did not claim to have suffered physical damage to its property or the loss of its property as a result of the COVID-19 virus or the Governor’s Order.

Holding

The Court of Special Appeals upheld the dismissal of GPL’s breach of contract count. The Appellate Court found that neither the Governor’s Order nor the COVID-19 virus resulted in “direct physical loss of or damage” to GPL’s property. The Appellate Court further found that GPL did not allege that its losses occurred because civil authorities prohibited access to its restaurant in order to respond to dangerous conditions at a nearby damaged property. Therefore, the Court of Special Appeals held that GPL had not alleged facts which would entitle it to coverage under the policy. However, the Appellate Court found that the Circuit Court erred in failing to declare the parties’ rights under the declaratory judgment count. Therefore, the Court of Special Appeals remanded the case to the Circuit Court in order to declare the parties rights in accordance with its opinion.

Questions about this case can be directed to Andrew White at (443) 641-0572 or awhite@tthlaw.com.