All across the country, companies are attempting to recover business and property losses resulting from COVID-19 shutdown orders. One of the hardest hit sectors is the food service industry, as many restaurants had to shut down completely for a period of time, or try to survive on carryout orders. The question being brought before courts across the country is whether these COVID-19 losses are covered by insurance.
One Ohio court recently weighed in and held that an insurance carrier must cover losses suffered by more than a dozen steak and seafood restaurants due to COVID-19 orders. The Court found that the insurance policy could be reasonably interpreted to cover the loss of use of the restaurants’ property. For court watchers, this decision is in the minority, as a large percentage of cases brought across the country are finding no coverage under the distinct facts and policy language at issue in each case. Of course, not all facts or policy language are the same.
Like all insurance coverage cases, the outcome is driven by the policy language for covered losses, and whether the exclusions written into the policies preclude coverage for the losses caused by the COVID-19 orders. In the U.S. District Court for the Northern District of Ohio case, Henderson Road Restaurant Systems Inc. dba Hyde Park Grill et al v. Zurich American Insurance Co., the insurance company argued that an insured property loss required tangible structural damage to the restaurants’ properties. As with many COVID-19 cases, there was no dispute that the restaurants did not sustain any structural damage.
The restaurants argued that they lost their real property when the state governments ordered that the properties could no longer be used for their intended purposes—as dine-in restaurants. The Court looked at the business income provision in the policy and read it to include instances where the policyholder loses the ability to use its insured properties for their intended purpose.
The insurance carrier also referenced the policy’s exclusions for claims tied to microorganisms and loss of use, which are common exclusions in the insurance industry. The court held that neither exclusion applied in this case. First, as to the microorganism exclusion, the losses were caused by the government shutdown orders and not by COVID-19 itself. The court then held that the loss of use exclusion could not be reconciled with the policy’s business income provision, which the court found extended coverage for the restaurants’ losses.
While this gets into the legal minutia that only attorneys enjoy, it emphasizes the importance of consulting with a legal professional when determining whether any business loss may be covered by insurance. As with any insurance coverage question, however, the answer depends on the specific facts and policy language at issue, along with the court where the case is pending. Please consult a legal professional for a more direct and specific inquiry.
This article should not be construed as legal advice or a legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer on any specific legal questions you may have concerning your situation.
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