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A federal district court in Cleveland agreed to dismiss COVID-19 business interruption litigation filed by a hotel chain against a Travelers Cos. Inc. unit, holding that the mere physical presence of the virus on its property does not constitute physical loss under its coverage.
Westlake, Ohio-based Ceres Enterprises LLC, which operates hotels in Ohio, Indiana and Minnesota, filed claims for lost business income under its insurance policy with Travelers Insurance Co. and was denied by the insurer, according to Thursday’s ruling by the U.S. District Court in Cleveland in Ceres Enterprises LLC v. Travelers Insurance Co.
The hotel alleged in its lawsuit, which charged the Travelers with breach of contract and insurance bad faith, that the pandemic and closure orders had caused direct physical loss that entitled it to coverage under its policy.
The court disagreed. “This case turns on the meaning of the language ‘physical loss of or damage to’ property in the insurance policies,” Travelers wrote, but does not define the terms, the ruling said.
The policy “is not ambiguous,” it said, however. “Taking these words together according to their ordinary meanings, ‘physical loss of’ property means material, perceptible destruction or deprivation of possession. ‘Physical damage to’ property means material, perceptible harm.
“In other words, the phrase intends a tangible loss of or harm to the insured property, in whole or in part. As the trigger for coverage, this policy language excludes financial or monetary losses for the novel coronavirus, SARS-CoV-2, which occasions this dispute for the simple reason that the virus did not work any perceptible harm to the properties at issue even if (construing the allegations in Plaintiff’s favor), the virus may be found on surfaces there,” the ruling said, in agreeing to dismiss the case.
A Travelers spokesman had no comment, while the plaintiff's attorney did not respond to a request for comment.
More insurance and risk management news on the coronavirus crisis here.
Travelers Cos. Inc. expects to report pretax catastrophe losses of $854 million and coronavirus-related losses of $114 million when it publishes its second-quarter results next week.