In our earlier First Alerts about COVID-19 business interruption insurance coverage (available here, here, and here), we discussed the nationwide and Ohio-based efforts to make insurance companies pay corporate policyholders’ business interruption losses stemming from the COVID-19 pandemic.
On December 12, 2022, the Ohio Supreme Court finally weighed in on the issue in Neuro-Communication Services, Inc. v. Cincinnati Insurance Company, et al., 2022-Ohio-4379. Unfortunately for policyholders, the Court broadly held that "direct physical loss or damage to property does not arise from (1) the general presence of Covid in the community, (2) the presence of Covid on surfaces at a premises, or (3) the presence on a premises of a person infected with Covid." The Court’s focus on "direct physical loss or damage to property" is because that is the gating language that gets policyholders into the business interruption section of many property insurance policies. Put differently, many policies pay business interruption losses only if those losses are caused by "direct physical loss or damage to property." The Court decided
that the widespread business shutdowns caused by the pandemic were not caused by "direct physical loss or damage to property," resulting in no coverage under the insurance policy language considered by the Court.
While Neuro-Communication may mean the end of the road for many corporate policyholders, others have unique policy language unaffected by Neuro-Communication. For example, some policies expressly contain a communicable diseases coverage grant. The upshot is that before waving the flag of surrender on a possible recovery, policyholders should lay their specific insurance policy language alongside the Neuro-Communication ruling and compare them. Critically
important, a policyholder who believes it may be owed coverage should investigate whether its policy contains a specific deadline for filing a lawsuit against its insurance company, especially considering that the three-year anniversary of the pandemic is fast approaching. Our Insurance Coverage practice group stands ready to help with any insurance coverage reviews.