In a move that could have significant implications for re/insurers, Pennsylvania has classified the coronavirus (COVID-19) pandemic as a natural catastrophe as part of its decision to uphold the state’s business closure order.
The Pennsylvania Supreme Court reasoned that the pandemic can be considered a natural disaster because of its serious threat to human life and because it fits within a catchall definition under the Emergency Code.
According to law firm Faegre Drinker Biddle & Reath, this code defines a natural disaster as “[a]ny 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.”
The Court ruled that COVID-19 falls under the “other catastrophe” clause, despite counter-arguments from petitioners, who felt the Emergency Code should not have been triggered by the crisis.
Analysts at Faegre Drinker Biddle & Reath noted that this decision could have ramifications for many commercial insurance contracts, with catastrophe programs in particular being brought into focus.
“It may prove significant that the Court has held that the COVID-19 pandemic is a natural disaster under the Emergency Code — a conclusion that may be cited in other contexts when addressing whether the pandemic qualifies as a “natural disaster,” “catastrophic event,” or “act of God” in other statutory, regulatory, or contractual contexts,” they explained.
The most immediate impact of the Court’s decision is that the Order stays in effect until further notice, though the Emergency Code limits the Order to 90 days unless renewed.
