The Hunton Insurance Recovery Team recently issued a client alert analyzing how two federal judges in Ohio ruled on COVID-19 coverage cases.
The policyholders criticized another major victory when a district court judge ruled that the insurer had to cover losses for a group of restaurants that had to be closed due to COVID-related state orders. The policy covered "direct physical loss of or damage to property", so the court reasoned that "direct physical loss" and "direct physical damage" necessarily have different meanings. Since "loss" means something other than "damage", "direct physical loss" does not require any structural change of property to trigger coverage. Although the restaurants could offer takeaway services, the court ruled that coverage was still triggered for properties deprived of their intended use, which was "almost exclusively for personal eating" before the pandemic. The court found that the main insurance provisions were reasonably receptive to the policyholder's interpretation. The court had to interpret that language in favor of coverage.
The Court rejected the insurer's argument that the exclusion of micro-organisms and loss of use were applied. Instead, the court ruled that, since there was no alleged presence of COVID-1
- The general presence in the community, or on surfaces in a room, of the new coronavirus known as SARS-CoV-2, constitutes direct physical loss or damage to property; and
- The presence in a premises of a person infected with COVID-19 constitutes direct physical loss or damage to property in that premises.
In that case, the policyholder seeks coverage under an "all-risk" policy for corporate loss of income as a result of the COVID-19 pandemic and related civilian government decisions. In the absence of a decisive precedent in the matter, the federal district court requested the state Supreme Court to clarify the "dozens, if not hundreds of cases" with COVID-19 coverage claims.
Both cases will be closely monitored as courts continue to determine whether insurance policies cover COVID-19-based claims.