February 19, 2021
COVID-19 and Business Interruption Insurance: A Trio of Recent Ohio Rulings
by Stephen E. Chappelear, Esq. and M. Charles Collins, Esq., Eastman & Smith Ltd.
Businesses hard hit by COVID-19 are seeking relief through business interruption insurance coverage, but finding obstacles. Three January 2021 Ohio state and federal court decisions highlight the importance of specific policy language.
Business interruption language in insurance policies typically requires “direct physical loss of or damage to” covered property (like fire or storm damage). Some policies exclude coverage for “loss due to virus or bacteria.”
In Queens Tower Restaurant Inc. dba Primavista v. Cincinnati Financial Corp., Primavista argued that, in compliance with the State of Ohio’s declaration of a state of emergency in March of 2020, patrons’ access to the Primavista restaurant was prohibited. Cincinnati Insurance argued that there was no property damage to Primavista’s restaurant buildings, and, therefore, no business interruption coverage existed. The policy did not include a specific virus exception to coverage. The Hamilton County Court of Common Pleas denied a motion to dismiss. The court ruled that “whether Covid-19 and/or Ohio’s orders caused property damage is a question of fact,” and allowed Primavista’s claim for coverage to proceed. However, the ruling did not determine whether coverage will ultimately exist under the business interruption policy.
In the subsequent federal decision in Henderson Road Restaurant Systems, Inc. dba Hyde Park Grille v. Zurich American Ins., Hyde Park Grille argued that the “direct physical loss of” its properties included the government’s orders prohibiting indoor dining. Zurich argued that access to the properties was not entirely prohibited, as carry-out and delivery food service was still permissible, and that the policy excluded losses for damages caused even “indirectly” by microorganisms. The parties stipulated that none of the insured’s premises were closed because of a confirmed presence of COVID-19 at these sites, and that there were no physical structural damages to any of the insured premises (a series of restaurants).
Notably, Zurich’s policy language covered “direct physical loss of or damage to property.”
The court applied Ohio law that requires policy coverage, if ambiguous, to be construed in the policyholder’s favor. While noting decisions that denied coverage because of policy requirements of physical loss to property, the court found Zurich’s policy language covering physical loss of property to be “more expansive and must be interpreted differently.” “[W]hen the Policy is liberally construed in Plaintiff’s favor, it provides coverage for Plaintiff’s lost business income.”
On that same day, another federal court judge in Neuro-Communications Services Inc. v. The Cincinnati Ins. Cos. addressed an insurer’s denial of business interruption coverage on the basis that the claim did not involve a direct physical loss to property but rather that the insured suffered losses due to the COVID-19 pandemic. The court certified to Ohio’s Supreme Court the question of whether, under Ohio law, COVID-19’s presence can be considered an insured direct physical loss or damage to property.
Perhaps the Ohio Supreme Court’s ruling on the certified question will provide more clarity for Ohio’s insureds seeking business interruption coverage related to COVID-19 issues.