Wednesday, January 27, 2021

Big Re/Insurance: "Ohio Federal Court Rules Business Interruption Coverage Extends to Loss of Use of Property Due to State-Ordered Closures"

 Big money, big problem.

The insurers reinsurers did not charge premiums for what they thought they were not covering.

From JD Supra, January 26:

On January 19, 2021, the U.S. District Court for the Northern District of Ohio Eastern Division ruled in Henderson Road Restaurant Systems, Inc. dba Hyde Park Grille, et al. v. Zurich Am. Ins. Co., No. 1:20-cv-01239, that a commercial insurance policy business income coverage form issued by Zurich American Insurance Company provided coverage to several steak and seafood restaurants in Ohio, Pennsylvania, Michigan, Indiana, and Florida which closed in response to state governmental orders restricting the operations of restaurants in an effort to abate the spread of COVID-19.

Insurer’s Arguments

In support of its motion for summary judgment, Zurich argued that plaintiffs’ economic losses were not covered by the policy as a matter of law because they were not caused by “physical loss or damage to property.” Alternatively, Zurich argued that, even if there had been direct physical loss to plaintiffs’ property, the policy’s microorganism exclusion would exclude coverage. Boiled down to its essence, Zurich argued that the underlying cause of loss was COVID-19, that COVID-19 is a microorganism, and that the microorganism exclusion applies. Other arguments proffered by Zurich were (i) the policy’s Civil Authority provision does not apply because the states’ orders did not “prohibit access” to plaintiffs’ premises, but rather permitted plaintiffs to continue to operate on a carry-out and delivery basis and therefore did not prohibit access to plaintiffs’ restaurants as required by the policy, and (ii) the Civil Authority coverage is inapplicable because the states’ orders did not respond to a direct physical loss of or damage to property located within one mile from the premises.

 Insureds’ Arguments 

In opposition, plaintiffs argued that Zurich could have easily drafted the policy language to limit coverage to physical or structural alteration/damage to tangible property, but instead, Zurich chose the language “direct physical loss of or damage to property,” contending that “direct physical loss of” includes an inability to possess something in the real, material or bodily world, and that the government orders caused plaintiffs to lose their property in some manner – pointing out that Zurich’s policy does not state that “direct physical loss of or damage to property” required “physical alteration or structural damage to any property at the Insured Premises....


See also: 

BigLaw on Big Insurance: Covid-19 Business Interruption Claims In The UK 

Knowledge@Wharton: "What Role Should Insurers Play in Covering Pandemic Business Losses?"

If interested, November 10's "Insurance: Epic Battle Over Covid-19 Coverage" has many of our previous links. It's big money