Ohio Supreme Ct. Rules No Coverage Owed for COVID Business Shutdown

The Ohio Supreme Court ruled Monday that COVID-19 cannot cause any direct physical damage or loss that is covered by a commercial property insurance policy, joining nine other state high courts that have rejected similar business-interruption claims.

The Ohio court released a 6-1 opinion that answered a certified question submitted to it by the US District Court for Northern Ohio, which is considering a lawsuit filed by Neuro-Communication Services against Cincinnati Insurance Co.

“The definition of the term ‘loss’ is clear: for coverage to be provided, there must be loss or damage to covered property that is physical in nature,” the majority opinion says. “Such loss or damage does not include a loss of the ability to use covered property for business purposes.”

State high courts in Delaware, Iowa, Massachusetts, North Carolina, Oklahoma, South Carolina, Virginia, Washington and Wisconsin have also ruled against policyholders seeking coverage for income lost because of COVID shutdowns, although not all went so far as the Ohio court did in ruling that the virus can never cause a covered direct physical loss or damage.

Neuro-Communication, an audiology practice, filed a lawsuit Cincinnati refused to pay its claim for income lost because of the 2020 pandemic shutdown. The District Court asked the Ohio Supreme Court to decide whether a direct physical loss or damage can be caused by (1) the general presence of Covid in the community, (2) the presence of Covid on surfaces at a premises, or (3) the presence on a premises of a person infected with Covid.

The Supreme Court majority answered no coverage is owed in any of those situations.

The thoroughness of the court’s answer makes the decision “particularly useful” for insurers, said Laura Foggan, chair of the Insurance/Reinsurance practice at the Crowell & Morning law firm in Washington D.C.

“By squarely ruling on all three scenarios, the court left no room for efforts to evade its conclusion that no coverage is available for COVID-19 business-interruption claims,” Foggan said in an email.

Foggan pointed out that the Supreme Court noted in its ruling that denying coverage for a business interruption caused by the SARS-CoV-2 virus “is consistent with the clear trend in the law in other jurisdictions.”

“This point was reinforced by the dissenting judge, who felt review was improvidently granted because there is a well-established body of law on contract interpretation that could be looked to in answering the questions presented,” she said.

Ohio Supreme Court Justice Michael P. Donnelly’s dissenting opinion said that the court should not have granted review because the “court already has a well-established body of jurisprudence on basic contract interpretation” that the federal court could have relied on.

The Vermont Supreme Court is the only state high court that has ruled in favor of a policyholder seeking coverage for income lost because of a COVID shutdown. The court pointed to decisions that found coverage was owed for property damaged by cat urine and defective Chinese drywall as supporting a find that the COVID virus can cause a covered property insurance loss.