In the first appellate court decision on insurance companies' requirement to provide business interruption coverage for COVID-19 related business closures, last week the Eighth Circuit issued a ruling in Oral Surgeons PC v. The Cincinnati Insurance Co., No. 20-3211, 2021 U.S. App. LEXIS 19775 (8th Cir. July 2, 2021). The court ruled that the lower court did not err in dismissing the suit brought by Oral Surgeons' on the basis that it failed to plead any physical alteration to the property.

In Oral Surgeons' appeal to the Eighth Circuit, it argued that nothing in the language of the policy supports the insurer's position that a covered loss must involve tangible physical damage. The policyholder emphasized that the policy definition of loss included either accidental physical loss or accidental physical damage. Because the policy contained two distinct definitions, loss and damage must be two different concepts, and "loss" can encompass loss of the ability to use a property for business purposes. Oral Surgeons argued that at best, the policy language is ambiguous on its face, and under established insurance law, the policyholder's interpretation of the ambiguous term must be used. The insurer further argued that the District Court judge should have given more weight to two out-of-state COVID-19 and business interruption decisions that went against Cincinnati, Studio 417, and North State Deli.

In the alternative, Cincinnati argued that the policy was designed to cover losses due to physical events such as "fire or storm," and asserted that Studio 417 and North State Deli were wrongly decided, and the reasoning had been rejected by numerous other courts. Cincinnati contended that the policy language was unambiguous and "must be enforced as written," and said that the policyholder was asking the Eighth Circuit to isolate policy terms out of context "without regard to the original intention" of the policy wording in its entirety, which the court should not do.