On 12 December 2022, the Supreme Court of Ohio answered a question certified by the United States District Court for the Northern District of Ohio in the context of a COVID-related business interruption case.
The Court held that “under Ohio law the term ‘direct physical loss or damage to property’ was unambiguous and meant that, for coverage to be provided, there must be loss or damage to covered property that was physical in nature, which did not include the insured's loss of the ability to use covered property for business purposes due to the general presence of Covid in the community, the presence of Covid on surfaces at a premises, or the presence on a premises of a person infected with Covid”.
The case originated from a suit filed by Neuro – a company which owns and operates an audiology practice – against its insurer. The former alleged that the Shutdown Orders issued on account of the pandemic caused it to suffer a direct physical loss to its property by requiring it to temporarily suspend most of its operations and that such losses were covered by the all-risk commercial-property insurance policy issued by the latter. By denying the relevant coverage, the insurer had thus breached its contractual obligations, plaintiff said.
With the judgment under examination, the Supreme Court of Ohio disagreed. First, the Court emphasized that the policy expressly referred to “direct loss” and defined the term loss as “accidental physical loss or accidental physical damage”. Thus, it held that the policy language was clear and unambiguous in requiring a physical alteration of property to trigger coverage. Plaintiff’s thesis under which the term loss included the loss of ability to use the physical space of its offices for business purposes was not convincing. This conclusion was further strengthened by the fact that the policy provided coverage also for the period of restoration after the direct loss had occurred and that, in so providing, the policy expressly referred to the activities of repairing, rebuilding, and replacing, i.e., activities which presupposes a physical alteration of the property. With this ruling, the Supreme Court of Ohio aligned its case-law to that of the majority of the Supreme Courts which have been required so far to answer certified questions of this kind.