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An Ohio state court judge refused Thursday to dismiss a COVID-19-related business interruption lawsuit filed by a North Canton restaurant against its insurer, citing the restaurant’s civil authority coverage and a policy endorsement for food-borne illness.
Nick Sylvester’s North End Italian Grille said Columbus, Ohio-based State Automobile Mutual Insurance Co. refused to pay for COVID-19-related business interruption expenses under its all-risk policy, according to the complaint filed in May in the Court of Common Pleas in Canton in Sylvester and Sylvester, Inc., d/b/a Nick Sylvester’s North End Italian v. State Automobile Mutual Insurance co., d/b/a/ State Auto Insurance Cos. The policy did not contain a virus or pandemic exclusion, according to the complaint.
The insurer based its March 26 coverage denial on its claim there was no direct physical loss of, or damage to, the premises and on policy exclusions, according to the complaint. It seeks a declaratory judgment and charges the insurer with breach of contract and bad faith.
In refusing to dismiss the case, the court pointed to the policy’s endorsement for food borne illness and its civil authority coverage.
“State Auto urges this Court to limit application of its additional coverage titled ‘Food-Borne Illness Endorsement’ as intending to cover only ‘risks emanating from or relating to food.’
“However, the scope of coverage is determined not by the headings or titles used by the insurer, but by the policy language itself,” the ruling said.
“The policy language contains no limitation that the risks must be related to food, but rather applies to ‘a contagious or infectious disease,’” it said.
The ruling said State Auto “also seems to argue the restaurant’s claim must fail because the governmental orders shutting down the restaurant were not specifically targeted at Sylvester or because there is no allegation that the coronavirus was actually discovered on the Sylvester’s premises,” the ruling said.
“The plain language of the policy, however, provides coverage for either actual or ‘alleged’ exposure of the premises to a contagious disease.”
Nothing in the policy language requires “that the civil authority order be directed specifically at Sylvester rather than at the restaurant industry more generally,” it said, in denying State Auto’s motion for a judgment on the pleadings.
Restaurant attorney Gary A. Carroto, a partner with Tzangas Plakas Mannos Ltd. in Canton, said in a statement, “Situations like this are exactly why Sylvester’s and other local businesses and their hard-working business owners made the significant financial investment in business interruption coverage.”
A State Auto spokesman had no comment.
Last month, a federal district court in Virginia refused to dismiss a COVID-19-related business interruption lawsuit filed by a spa against a State Farm Mutual Insurance Co. unit despite its policy’s virus exclusion.
More insurance and risk management news on the coronavirus crisis here.
A North Carolina state court judge has ruled in favor of a group of restaurants in pandemic-related business interruption litigation, holding the state’s order to close the restaurants was a covered physical loss under their policies.