The Hunton Insurance Recovery Team recently issued a client alert analyzing how two Ohio federal judges ruled on COVID-19 coverage cases.

Policyholders chalked up another big victory when one district court judge held that the insurer must cover losses for a group of restaurants required to shut down as a result of COVID-related government orders. The policy covered “direct physical loss of or damage to” property, so the court reasoned that “direct physical loss” and “direct physical damage” necessarily carry different meanings. Because “loss” means something different from “damage,” “direct physical loss” does not require any structural alteration of property to trigger coverage. Even if the restaurants were able to provide take-out services, the court held that coverage was still triggered for properties deprived of their intended use, which was “almost exclusively for in person dining” before the pandemic. Finding that the key policy provisions were reasonably susceptible to the policyholder’s interpretation, the court was required to interpret that language in favor of coverage.

The court rejected the insurer’s argument that the microorganism and loss of use exclusions applied. Instead, the court ruled that, because there was no alleged presence of COVID-19 on the covered property, the loss was caused by the government orders, a cause of loss not “clearly” contemplated within the microorganism exclusion. The “loss of use” exclusion also did not apply because the insurer’s interpretation would “void business income coverage in its entirety.” Absent “clear and exact” language to exclude an otherwise covered loss, the court would not interpret the exclusions in favor of the insurer. After deferring any discovery on damages until legal issues were resolved by the appellate court, the district court authorized the insurer to seek an interlocutory appeal on coverage, teeing up federal appellate review on the policyholder’s COVID-19 coverage claims.

On the same day, a different Ohio federal judge certified two coverage questions to the Supreme Court of Ohio, asking whether:

  • The general presence in the community, or on surfaces at a premises, of the novel coronavirus known as SARS-CoV-2, constitutes direct physical loss or damage to property; and
  • The presence on a premises of a person infected with COVID-19 constitutes direct physical loss or damage to property at that premises.

In that case, the policyholder is seeking coverage under an “all-risk” policy for business income losses suffered as a result of the COVID-19 pandemic and related civil authority orders. In the absence of settled precedent on the issue, the federal district court requested the state high court to provide clarity for the “dozens, if not hundreds of cases” involving COVID-19 coverage claims.

Both cases will be watched closely as courts continue to decide whether insurance policies cover COVID-19-based claims.