The Ohio Supreme Court on Monday became the seventh state high court to rule that policyholders were ineligible for coverage for Covid-19 business interruption.
That leaves only the Vermont Supreme Court as the only state supreme court to date to rule in favor of policyholders on that issue.
Boardman, Ohio-based Neuro Communication Services Inc. had an all-perils commercial property policy issued by Cincinnati Insurance Co., according to the Ohio Supreme Court ruling in Neuro-Communication Services Inc. v. Cincinnati Insurance Co. et al.
The company, which operates an audiology business under the name Hearing Innovations, halted nearly all of its operations beginning March 23, 2020, and did not resume operations until May 4, 2020.
After Cincinnati denied coverage because its claim did not involve a physical loss of the property, it filed suit in US District Court in Youngstown. District Court Judge Benita Y. Pearson asked the Ohio Supreme Court to consider the case.
The issue certified for review by the state supreme court was whether the presence of the coronavirus constituted direct physical loss or injury and whether the presence of an infected person constituted direct physical loss or injury.
“Cincinnati argues that the policy̵7;s definition of the term `loss’ as “accidental physical loss or accidental physical damage’ necessarily requires that there be some physical damage to Neuro’s property,” the ruling said.
Neuro “argues that the term ‘loss’ includes a loss of use,” it said. “We agree with Cincinnati. The definition of the term “loss” is clear: for coverage to be provided there must be loss or damage to the covered property that is physical in nature,” which “does not include a loss of the ability to use the covered the property for business purposes,” it said.
A brief dissenting opinion said the Supreme Court should not have accepted the case because “This Court already has well-established jurisprudence on fundamental contract interpretation.”
Cincinnati Insurance said in a statement that “We thank the court for its careful consideration of this case” and are pleased that its decision follows those of the other state supreme courts “and all federal appeals courts to date” on the matter.
State supreme courts that have ruled in favor of the insurers are those in Iowa, Massachusetts, Oklahoma, South Carolina, Washington and Wisconsin, in addition to opinions from numerous federal district and appeals courts on the issue.
Nicholas A. DiCello, a partner with Spagenberg, Shibley & Liber LLP in Cleveland who represented Neuro-Communication, said in a statement: “We are disappointed by the court’s ruling on behalf of our many clients and Ohio businesses.
“The policy before the court did not include a commonly used virus exclusion form. In the absence of a virus exclusion, our customers understood that they would be covered.
“At the very least, we thought the policy was ambiguous, and ambiguities should be interpreted in favor of coverage. Nevertheless, the court received extensive information and heard substantial arguments, and we respect its ruling.”
John N. Ellison and Richard P. Lewis, partners at Reed Smith LLP in Philadelphia and New York, respectively, who authored an amicus brief filed by United Policyholders in the case on behalf of Neuro-Communications, said in a statement that the court’s ruling “shows well some of the inappropriately large hurdles that policyholders had to clear” in litigating COVID claims.
It said those barriers include allowing the insurance industry “to advance arguments unrelated to the origin and purpose of coverage,” and the court’s acceptance of them.