A federal district court judge has asked the Ohio Supreme Court to rule on whether the presence of the COVID-19 virus can be considered an insured direct physical loss or damage to property under Ohio law. The case is Neuro-Communication Services Inc., etc. v The Cincinnati Insurance Co.; The Cincinnati Casualty Co.; and The Cincinnati Indemnity Co.
Judge Benita Y. Pearson, of U.S. District Court in Youngstown, has asked the Ohio Supreme Court to rule on the issue. The suit stems from a COVID-19 business interruption claim filed by an Ohio-based audiology company called Neuro-Communication Services Inc., against its insurer, The Cincinnati Insurance Co. (Cincinnati.)
Neuro-Communication purchased an all-risk insurance policy from Cincinnati. Soon after mandated COVID-19 shutdowns began, Neuro-Communication submitted a business interruption claim to the insurer, which was denied on the basis that it did not involve a direct physical loss to the property.
The state Supreme Court order noted that differing interpretations of Ohio contract law by various courts across the state threatens to undermine the uniform application of the law to similarly situated litigants. Once completed, the certification procedure will allow the Supreme Court of Ohio to decide on the questions and bring uniformity of the application of state law to the claims.
On the same day this order was issued, a federal district court in Cleveland refused to dismiss a COVID-19 business interruption case filed by a restaurant against in's insurance provider Zurich. The restaurant chain closed its restaurants in March in response to government orders. The court held that the policy language was "reasonably susceptible of more than one interpretation," and was ambiguous because the policy provides that it will pay for direct physical loss of or damage to "real property." The ambiguity arises due to the presence of the disjunctive conjunction "or." The court also found that a "microorganism" exclusion was inapplicable to the events that occurred. In this case, the court denied the bad faith claim of the insured, finding that the insurer had reasonable justification for determining that there was no coverage under the policy as other courts have heard and agreed with similar arguments and found in favor of insurers.