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Courts in seemingly every jurisdiction are facing a wave of insurance coverage litigation arising out of the COVID-19 pandemic which requires them to address the extent to which typical business insurance policies apply (or not) to our decidedly atypical times. With little appellate guidance to date, courts across the country have reached different, and often irreconcilable, results. A series of recent federal court cases in Ohio has put the challenge (for courts, counsel, and parties alike) on full display. Below, we discuss two cases that reached opposite results based on similar facts, and a third that chose to refer the question to the Ohio Supreme Court.
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Viewpoint: Ohio at Epicenter in Quest for COVID-19 Business Interruption Cover By K. James Sullivan | February 2, 2021
In our original first alert about COVID-19 business interruption insurance coverage that we authored at the pandemic’s outset, we predicted extreme rigidness by insurance companies and coverage denials galore. Regrettably for policyholders, our prediction came true, with myriad insurance coverage lawsuits following in U.S. state and federal courts. To date, the vast majority of federal and state courts have sided with the insurance industry – nearly 83% of rulings on the merits have favored insurers so far.
Did Ohio Just Turn the Tide, or Did It Set the Stage for U.S. Policyholders’ Final Act?
In a scenario that has played out across the country for nearly a year now, a group of restaurants based in Ohio were ordered by government authorities to close their on-site dining.
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Two recent COVID-19 insurance decisions highlight how different interpretations of the same few policy words can result in one policyholder losing the coverage for which it paid. In
Henderson Road Restaurant Systems, Inc. v. Zurich American Ins. Co., No: 1:20 CV 1239, 2021 WL 168422 (N.D. Ohio Jan. 19, 2021), the Court granted policyholders coverage for COVID-19-related business interruption losses. Stay-at-home orders there forced policyholders to shut down most of their dine-in restaurants across several states, which caused severe financial damages.
Id. The Court, applying Ohio law, interpreted the insurance policy’s coverage for “direct physical loss of or damage to ‘real property.’” It accepted policyholders’ argument that they suffered physical loss of their restaurants as a result of the government-ordered shutdowns.