THE OREGON CLINIC, PC V. FIREMAN'S FUND INS. CO., No. 22-35047 (9th Cir. 2023)
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This appeal arises out of a commercial property insurance policy (“Policy”) that Oregon Clinic, P.C. (“Oregon Clinic”) purchased from Fireman’s Fund Insurance Company (“Fireman’s Fund”). The Policy provides Oregon Clinic, a medical provider with more than fifty locations in Oregon, with coverage for a reduction of business income only if its insured property suffers “direct physical loss or damage.” In March 2020, after the COVID-19 pandemic began, Oregon Clinic, like hundreds of other insured businesses nationwide, sought coverage under its Policy. It alleged that it suffered “direct physical loss or damage” because of the COVID-19 pandemic and related governmental orders that prevented it from fully making use of its insured property. Fireman’s Fund denied coverage. Oregon Clinic then sued Fireman’s Fund in the United States District Court for the District of Oregon. At Oregon Clinic’s request, the Ninth Circuit certified to the Oregon Supreme Court the interpretation of “direct physical loss or damage” under Oregon law and stayed proceedings. The Oregon Supreme Court declined the certification request.
The Ninth Circuit affirmed the district court’s dismissal. The panel held that the Oregon Supreme Court would interpret “direct physical loss or damage” to require physical alteration of property, consistent with the interpretation reached by most courts nationwide. Because Oregon Clinic failed to state a claim under this interpretation and because the amendment would be futile, the panel affirmed the district court’s judgment.
Court Description: Diversity/COVID-19 Business Losses. The panel affirmed the district court’s dismissal for failure to state a claim of medical provider Oregon Clinic’s complaint alleging that its insurer, Fireman’s Fund Insurance Company, improperly denied coverage for losses it sustained because of the COVID-19 pandemic.
The insurance policy provided Oregon Clinic with coverage for reduction of business income only if its insured property suffered “direct physical loss or damage.” Oregon Clinic alleged that it suffered “direct physical loss or damage” because of the COVID-19 pandemic and related governmental orders that prevented it from fully making use of its insured property. Fireman’s Fund denied coverage and Oregon Clinic sued, asserting claims for breach of contract and breach of the implied duty of good faith and fair dealing.
The panel certified to the Oregon Supreme Court the interpretation of “direct physical loss or damage” under Oregon law and stayed proceedings. The Oregon Supreme Court declined the certification request. The panel held that the Oregon Supreme Court would interpret “direct physical loss or damage” to require physical alteration of property, consistent with the interpretation reached by most courts nationwide. Because Oregon Clinic failed to state a claim under this interpretation, and because amendment would be futile, the panel affirmed the district court’s judgment.
This opinion or order relates to an opinion or order originally issued on April 10, 2023.
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