An “all-risk” commercial property insurance policy does not cover the financial losses Ohio businesses suffered from state-mandated shutdowns at the onset of the COVID-19 pandemic, the Supreme Court of Ohio ruled today.

In a 6-1 decision, the Supreme Court wrote that a Cincinnati Insurance policy pays for damages for a “direct loss,” and that a direct loss requires there to be some loss or damage that is physical in nature. The general presence of COVID-19 in the community, the presence of the coronavirus on surfaces at a premises, and the presence of a person infected with COVID-19 on the premises do not cause a direct loss to property, the Court stated.

The Court upheld Cincinnati Insurance’s rejection of a claim from a Northeast Ohio audiology company that sought coverage from the financial losses suffered during a seven week, state-ordered shutdown of nonessential businesses in early 2020. The company argued its inability to access its offices constituted a direct physical loss of its property, which should be covered by its insurance policy.

Neuro-Communication Services sued Cincinnati Insurance in the U.S. District Court for the Northern District of Ohio after the insurer denied its claim for COVID-19-related losses. The hearing services company sought to lead a nationwide class-action lawsuit for all businesses with similar commercial property insurance policies that had been denied coverage related to the pandemic.

Before moving forward with the case, the federal court asked the Supreme Court of Ohio to determine whether the presence of the coronavirus constitutes a “direct loss” under Ohio insurance law. The Supreme Court agreed to answer the question, and ruled that it does not.

Writing for the Court majority, Justice Jennifer Brunner stated that, based on the language of the insurance policy, it is clear that a loss is defined as an “accidental physical loss or accidental physical damage” to property, and that payment of a claim is triggered only when there is some “actual, tangible physical alteration of property.”

“The term ‘direct loss’ does not include Neuro’s [COVID-19]-related loss of the use of its offices for business purposes,” she wrote.

Citing a 2021 U.S. Sixth Circuit Court of Appeals decision (Santo’s Italian Café, LLC v. Acuity Ins. Co.), Justice Brunner explained loss of use is not the same as physical loss. “It is one thing for the government to ban the use of a bike or a scooter on city sidewalks; it is quite another for someone to steal it,” the Sixth Circuit stated in Santo.

Today’s opinion stated its interpretation of commercial insurance policies to be similar to those of several other state and federal courts regarding businesses seeking insurance coverage for COVID-19-related losses.

Chief Justice Maureen O’Connor and Justices Sharon L. Kennedy, Patrick F. Fischer, R. Patrick DeWine, and Melody Stewart joined Justice Brunner’s opinion.

In a dissenting opinion, Justice Michael P. Donnelly wrote it was unnecessary for the federal court to seek an interpretation from the Supreme Court because there is already “a well-established body of jurisprudence on basic contract interpretation.” He would have dismissed the certified question as having been improvidently accepted.

2021-0130. Neuro-Communication Servs., Inc. v Cincinnati Ins. Co., Slip Opinion No. 2022-Ohio-4379.

View oral argument video of this case.

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