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In what is apparently only the second federal appeals court ruling on the issue, the 6th U.S. Circuit Court of Appeals in Cincinnati held Wednesday that an Italian restaurant is not entitled to COVID-19 business interruption coverage under its commercial property policy.
A unanimous three-judge appeals court panel affirmed a lower court ruling by the U.S. District Court in Cleveland in Santo’s Italian Café LLC v. Acuity Insurance Co. The panel held that Santosuossos, a Medina, Ohio, restaurant, had not established there was a direct physical loss or damage under the terms of the policy issued by Sheboygan, Wisconsin-based Acuity.
“Whether one sticks with the terms themselves (a ‘direct physical loss of’ property) or a thesaurus-rich paraphrase of them (an ‘immediate’ ‘tangible’ ‘deprivation’ of property), the conclusion is the same. The policy does not cover this loss,” the ruling said.
“The restaurant has not been tangibly destroyed, whether in part or in full. And the owner has not been tangibly or concretely deprived of any of it. It still owns the restaurant and everything inside the space. And it can still put every square foot of the premises to use, even if not for in-person dining use,” it said.
“All in all, the causes of the suspension of operations – the prohibition on in-person dining – did not arise from a physical loss of property or physical damage to it,” the ruling said, citing the July 2 appellate court decision by the 8th U.S. Circuit Court of Appeals in St. Louis, which ruled similarly, in Oral Surgeons, P.C. v. Cincinnati Insurance Co.
Plaintiffs attorney Colin P. Sammon, of Sammon Law LLC in Medina, said the appellate court had “lost its way” in terms of understanding what it means for a business to be denied use of its property.
He also noted that the Ohio Supreme Court has agreed to consider the issue of business interruption losses in the context of COVID-19 in Neuro-Communication Services Inc., etc. v. The Cincinnati Insurance Co.; The Cincinnati Casualty Co.; and The Cincinnati Indemnity Co.
Insurer attorneys did not respond to a request for comment.