The 6th circuit joins the 8th and 11th to reject the claim for business interruption related to COVID

A third federal appeals court has ruled against a policyholder seeking business interruption coverage for lost income due to the coronavirus pandemic.

A panel from the 6th Circuit Court of Appeals, in a released ruling released Wednesday, upheld a district court ruling that found government orders forcing a restaurant to shut down its dining hall had failed. caused direct physical damage or loss to property.

“The restaurant was not tangibly destroyed, either in part or in whole,” the panel said in an opinion written by Chief Justice Jeffrey S. Sutton. “And the owner has not been deprived of it in a tangible or concrete way. He still owns the restaurant and everything inside the space. And it can still use every square foot of the premises, even if it’s not used for in-person meals. “

The decision did not clarify whether the presence of SARS-CoV-2 on a property could cause direct physical damage or loss, leaving that question for another day. Many companies that have taken out policies without virus exclusion claim that the virus particles stay suspended in the air and cling to surfaces, rendering their properties unusable for some time.

On July 2, a panel of the 8th Circuit Court of Appeals upheld a ruling that government orders limiting the number of patients who can receive care in a dental surgery office did not create direct physical loss covered by a commercial property insurance policy. A panel of the 11th Circuit Court of Appeal ruled that the virus particles themselves cannot create a covered loss.

Indianapolis attorney Christopher E. Kozak, who filed an amicus brief on behalf of policyholders united in the 6th Circuit case, said the 11th Circuit did not hold oral arguments and had issued a brief, unpublished decision. “It looked like they didn’t take him seriously,” he said.

Kozak, who is with Plews, Shadley, Racher & Braun, said the ruling is expected to have little impact on other proceedings.

Kozak said he was disappointed with the 6th Circuit’s decision. He said a jury, not judges, should decide whether the virus causes loss or physical damage.

“Whether a loss has occurred is almost a question of fact par excellence,” he told the Claims Journal.

Santo’s Italian Cafe, which operates as SantoSuossos Pizza Pasta Vino in Medina, Ohio, was forced to close its doors to in-person meals in March 2020 due to state emergency public health orders . The restaurant filed a complaint after Acuity Insurance Co. dismissed its business interruption claim.

The 6th Circuit panel said the policy included a virus exclusion and an ordinance and law exclusion, both of which appear to prohibit coverage of a shutdown caused by the coronavirus pandemic. But the court said it did not have to decide whether the exclusions applied because “the North Star” in its analysis is whether there has been direct physical damage or loss of property. .

The notice says Acuity had promised to pay for lost business income only during the “restoration period,” which begins 24 hours after the loss and ends after the building is repaired, rebuilt or replaced.

“There is nothing to repair, rebuild or replace that would allow restoration operations to resume in person,” said the opinion. “What the restaurant needed was an end to the ban on in-person dining, not the repair, reconstruction or replacement of its property.”

Hartford, Connecticut attorney Wystan Michael Ackerman, who wrote an amicus brief in the case on behalf of the American Property and Casualty Insurance Association, said the 6th Circuit reaffirmed the argument in its opinion. Insurance Industry Center Against COVID Business Disruption Claims: The virus harms people, not property.

Ackerman, who works with Robinson & Cole, said most of the lawsuits filed so far allege coverage is due due to government orders. He said lawsuits alleging the virus was physically present on property were in the minority.

The Ohio Supreme Court may soon rule on the unanswered question in the Santos Italian Cafe case whether the virus itself can cause covered physical loss. Ackerman said the court in April accepted a certified question from the U.S. Northern District of Ohio that answered exactly that point.

The Supreme Court file for the case, Neuro-Communication Services Inc., etc., v. The Cincinnati Insurance Co., shows that the APCIA, Ohio Insurance Institute, State Auto Mutual Insurance Co. Nationwide Mutual Insurance Co., United Policeholders, Restaurant Law Center, Francois Inc and Queens Tower Restaurant have filed amicus briefs.

About the photo: The exterior of SantosSuossos Pizza Pasta Vino is shown. Photo courtesy of

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