Property policy does not cover COVID shutdown order – 6th circuit

Chairs sit on tables at a closed restaurant in Columbus, Ohio, USA, May 1, 2020. REUTERS / Megan Jelinger

  • Continuation of the winning streak on appeal for insurers
  • Ohio restaurant said “loss” of property included loss of use

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(Reuters) – The 6th U.S. Court of Appeals on Wednesday said Acuity Insurance’s earnings disruption coverage did not extend to restaurant losses due to COVID-19 or an executive order from Ohio that restricted restaurants to performing services, marking the third straight victory for insurers battling pandemic loss claims in federal appeals courts.

A panel of three 6th Circuit judges agreed with Acuity attorneys at Hanna, Campbell & Powell that the all-hazards policy issued at Santo’s Italian Café in Medina, Ohio, which included business losses “caused by direct physical loss or property damage ”, clearly did not cover the loss of use of its catering facilities or the downturn in business in general.

The virus itself did not “physically and directly alter the property,” circuit chief judge Jeffrey Sutton wrote for the panel. And, the governor’s and health department orders “simply prohibited one use of the property … and through it all did not cause direct physical damage to the property.”

Sutton was joined by circuit judges Alice Batchelder and Joan Larsen.

Based on its ruling that there was no “covered cause of loss,” the court said it did not need to determine whether the exclusion of the virus from the police, or its exclusion for any “ordinance or law” regulating the use of goods would constitute an alternative ground. to rule for the insurer.

Santo’s attorney, Colin Sammon, did not immediately respond to a request for comment.

Hanna Campbell’s John Chlysta praised the opinion for its “logic and common sense”, citing the court’s conclusion that “insurance” is not a general safety net for all hazards “and should not be pushed beyond its terms to cover perils or events that were never intended to be covered.

The restaurant’s arguments drew the friendly support of the United policyholders, represented by Plews, Shadley, Racher & Braun and Reed Smith; and the Restaurant Law Center and the Ohio Restaurant Association, represented by Gabriel Gillett, now at Jenner & Block.

The American Property Casualty Insurance Co. and the National Association of Mutual Insurance Companies, represented by Robinson & Cole, and the Ohio Insurance Institute, represented by Koehler Fitzgerald, filed amicus briefs supporting Acuity.

The ruling upholds a December ruling by U.S. District Judge Pamela Barker. The appeal sparked increased interest due to two favorable rulings for the plaintiff from other judges in the same district in January. In one, the judge found coverage under the Zurich American policy, but certified his decision for an interlocutory appeal; however, the 6th Circuit has not yet agreed to hear it.

In the other, the judge certified two cover issues to the Ohio Supreme Court, which split 4-3 in agreeing to consider the issues.

Chris Kozak of Plews Shadley said in an email Wednesday that United Policyholders ultimately expects a “vindication” from the Ohio Supreme Court.

According to the Covid Coverage Litigation Tracker from the Carey Law School at the University of Pennsylvania, 195 federal appeals are pending on whether loss of earnings insurance covers losses from the pandemic.

The 8th and 11th Circuits also claimed substantive victories for the insurers. Last month, the 3rd Circuit ordered lower court judges to reconsider their decisions to send the coverage cases to New Jersey and Pennsylvania state courts.

The case decided on Wednesday is Santo’s Italian Cafe v. Acuity Insurance, 6th US Circuit Court of Appeals No. 21-3068. ).

For Acuity: John Chlysta of Hanna, Campbell & Powell (sharing time with friendly lawyer Stephen Goldman of Robinson & Cole).

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