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Insurers win another state high court COVID ruling

COVID ruling

The Ohio Supreme Court on Monday became the eighth state high court to rule that policyholders were not entitled to COVID-19 business interruption coverage.

That leaves only the Vermont Supreme Court as the only state supreme court to date to rule in policyholders’ favor on that issue.

Boardman, Ohio-based Neuro Communication Services Inc. had an all-risk commercial-property insurance 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 practice under the name Hearing Innovations, stopped almost all of its operations beginning on March 23, 2020, and did not resume business until May 4, 2020.

After Cincinnati denied coverage on the basis its claim did not involve a physical loss to the property, it filed suit in U.S. District Court in Youngstown. District Court Judge Benita Y. Pearson asked the Ohio Supreme Court to consider the case.

The question certified for consideration by the state Supreme Court was whether coronavirus’ presence constituted direct physical loss or damage and whether an infected person’s presence constitutes direct physical loss or damage.

“Cincinnati argues that the policy’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 loss or damage to Covered Property that is physical in nature,” which “does not include a loss of the ability to use Covered 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 a well-established body of jurisprudence on basic contract interpretation.”

Cincinnati Insurance said in a statement that “We thank the Court for its careful consideration of this case” and are pleased its decision follows those from the other state supreme courts “and all federal appeals courts to date” on the issue.

State Supreme Courts that have ruled in insurers’ favor are those of Delaware, Iowa, Massachusetts, Oklahoma, South Carolina, Washington and Wisconsin, in addition to opinions by many 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 in the Court’s ruling on behalf of our many clients and Ohio business owners.

“The policy before the Court did not contain a commonly used virus exclusion form. Absent a virus exclusion, our clients understood they would be covered.

“At a minimum, we believed the policy was ambiguous, and ambiguities are to be interpreted in favor of coverage. Nevertheless, the Court received comprehensive briefing and heard substantial argument, 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 Neuro-Communication’s behalf, said in a statement that the court’s ruling “well demonstrates some of the inappropriate major hurdles that policyholders had to clear” in litigation COVID claims. 

It said these hurdles include allowing the insurance industry “to make arguments untethered to the origin and purpose of the coverage,” and the court’s acceptance of them.