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Pennsylvania Supreme Court Affirms Governor’s Power to Issue COVID-19 Executive Order

Apr.20.2020

Ruling Could Have Potential Implications for Insurance Issues

On April 13, 2020, the Pennsylvania Supreme Court invoked its Kings Bench jurisdiction to decide, and ultimately deny, an emergency application for extraordinary relief challenging Governor Tom Wolf’s executive order compelling closure of the physical operations of all non-life-sustaining businesses in response to the COVID-19 pandemic (the “Executive Order”). See Friends of DeVito v. Wolf, No. 68 MM 2020 (Pa. Apr. 13, 2020). While the decision does not address insurance policy terms or coverage issues, policyholders or insurers may attempt to rely upon Devito in connection with COVID-19 related claims for business interruption or civil authority coverage. 

In DeVito, four Pennsylvania businesses (classified as “non-life-sustaining”) and one individual raised statutory and constitutional challenges to the Executive Order. Under Pennsylvania law, the Governor is vested with broad emergency management powers under the Emergency Code. The provisions of the Emergency Code apply to “disasters,” including man-made, natural and war-caused disasters. A “natural disaster” is defined to mean:

Any hurricane, tornado, storm, flood, high water, wind-driven water, tidal wave, earthquake, landslide, mudslide, snowstorm, drought, fire, explosion or other catastrophe which results in substantial damage to property, hardship, suffering or possible loss of life.

(Emphasis added.) In assessing whether the COVID-19 pandemic constituted a “natural disaster,” the court reasoned that:

[T]he specific disasters in the definition of ‘natural disaster’ themselves lack commonality, as while some are weather related (e.g., hurricane, tornado, storm), several others are not (tidal wave, earthquake, fire, explosion). . . . the only commonality among the disparate types of specific disasters referenced is that they all involve “substantial damage to property, hardship, suffering or possible loss of life.” In this respect, the COVID-19 pandemic is of the ‘same general nature or class as those specifically enumerated,’ and thus is included, rather than excluded, as a type of "natural disaster.”

(Emphasis added). According to the court, by setting forth a specific list and then adding the language “or other catastrophe which results in substantial damage to property, hardship, suffering or possible loss of life,” the legislature sought to expand the disaster circumstances that would qualify as a “natural disaster.” The court concluded that the “COVID-19 pandemic is, by all definitions, a natural disaster and a catastrophe of massive proportions.”

The court next rejected the business owners’ argument that the governor’s emergency power “does not include any ability to close their businesses” because it “only authorizes the governor to act in a ‘disaster area,’ and there have been no disasters in the areas in which their businesses are located.” The court rejected that argument, stating that COVID-19 “cases have now been reported in all counties in the Commonwealth,” and that the business owners’ argument “ignored the nature of this virus and the manner in which it is transmitted.” The court emphasized that: “[t]he virus spreads primarily through person-to-person contact, has an incubation period of up to fourteen days, one in four carriers of the virus are asymptomatic, and the virus can live on surfaces for up to four days.” Given those facts, the court held that “any location…where two or more people can congregate is within the disaster area.”

The court also rejected the petitioners’ argument that the Executive Order exceeded the authorized police power. Among other things, petitioners contended that “shuttering their businesses [wa]s unnecessary for the prevention of the spread of COVID-19 where the disease has not been detected at their places of business.” The court rejected the suggestion that there is no significant risk of the spread of the virus at businesses where it has not been detected. According to the court, “COVID-19 does not spread because the virus is ‘at’ a particular location.” Instead, the virus spreads because of person-to-person contact, and “can live on surfaces for up to four days and can remain in the air within confined areas and structures.” The court concluded that “[t]he protection of the lives and health of millions of Pennsylvania residents is the sine qua non of a proper exercise of police power.”

Finally, the court also rejected a series of constitutional challenges to the Executive Order.  Petitioners argued that the Executive Order violated the separation of powers doctrine, that it constituted a taking requiring just compensation; that they were not accorded procedural due process in the determination of which businesses were exempt from the Executive Order or in the waiver process; that the order violated equal protection principles; and that it interfered with the right of free speech and assembly as to one plaintiff, a political campaign committee. The court rejected each constitutional argument in turn. According to the court:

  • There was no violation of the separation of powers doctrine because the legislature expressly authorized the Governor’s actions through its enactment of the Emergency Code;
  • There was no unjust taking requiring compensation because payment of just compensation is not required where the regulation of property was temporary and involved the exercise of the Commonwealth’s police power;
  • There was no due process violation because the absence of pre-deprivation notice was necessary due to the nature of the emergency, and the waiver application process provided the necessary post-deprivation due process given that the deprivation of property interests was temporary;
  • There was no violation of equal protection because the plaintiffs challenging the Executive Order were not similarly situated to other entities who were permitted to continue certain business or professional activities in certain circumstances; and
  • There was no violation of the First Amendment rights of one plaintiff, a campaign committee, because the restrictions imposed were content neutral, limited in scope and served a substantial governmental interest.

Three justices joined in a concurring and dissenting opinion, which found that the present public health crisis may properly be regarded as a disaster emergency. Those justices, however, noted that they would have refrained from exercising jurisdiction to allow creation of a record for judicial review as a check on arbitrariness in the exercise of power to close many businesses throughout the Commonwealth.

DeVito does not address or concern insurance coverage for COVID-19 claims for business interruption or civil authority coverage. However, policyholder advocates have suggested the ruling supports their view that property policies must respond to COVID-19 related business interruption claims. For instance, they have argued that, by analogizing the COVID-19 pandemic to natural disasters such an earthquake, tornado or fire, the court allegedly showed that the COVID-19 pandemic is indistinguishable from the other kinds of events which property coverage is designed to cover. According to policyholders, the court’s analogies undermine the carriers’ position that this is not the type of occurrence for which property coverage was intended to apply. Policyholder advocates also urge that the actual presence of the virus at an insured’s property is not dispositive as to whether the insured’s loss has been caused by physical property damage. They contend that Devito demonstrates that the issue is whether a property has been rendered unusable by virtue of physical damage either at that location or in the broader disaster area in which it is located. They claim that the virus is so pervasive as to be presumed to be physically present almost everywhere and, as a result, even a deep cleaning of a specific property cannot eradicate this damage.

Insurers may argue that under a straightforward reading of the coverage prerequisite of direct physical loss of or damage to property, the Devito decision instead supports the conclusion that policyholders cannot meet the physical damage trigger for business interruption or civil authority coverage. In Devito, the plaintiffs stressed that the virus had not been detected at their businesses, just as it likely has not been detected at the majority of businesses that may present business interruption claims. Further, the court held that the reason for the Executive Order was the health and safety of the public, to whom the virus might be spread by interpersonal contact. It did not conclude that “physical damage” was present almost everywhere, or anywhere at all. It stated that, whether the virus was detected at plaintiffs’ businesses was irrelevant because “COVID-19 does not spread because the virus is ‘at’ a particular location.” Insurers thus may argue that Devito supports the conclusion that the Executive Order was issued to protect the public health, not to respond to property damage or to suggest that, by its nature, COVID-19 is present or causes damage at any particular location. Similarly, insurers may argue that Devito found that closures of certain physical operations of businesses were warranted not due to property damage, but to protect the health and safety of the public by avoiding the risk transmission of the virus where two or more people might come into close physical contact. 

For more information, please contact the professional(s) listed below, or your regular Crowell & Moring contact.

Laura Foggan
Partner – Washington, D.C.
Phone: +1 202.624.2774
Email: lfoggan@crowell.com
Michael K. Robles
Partner – New York
Phone: +1 212.803.4035
Email: mrobles@crowell.com
Kelly H. Tsai
Senior Counsel – New York
Phone: +1 212.803.4069
Email: ktsai@crowell.com