By Shawn Rice

Law360 (March 23, 2021, 8:16 PM EDT) -- An Ohio bridal shop can't tap into its coverage with Owners Insurance Co. for business interruption losses tied to the COVID-19 pandemic and government shutdown orders, a federal judge ruled Tuesday, finding the shop failed to allege any "direct physical loss or damage."

U.S. District Judge Solomon Oliver Jr. held that Owners doesn't owe coverage to Bridal Expressions LLC, which temporarily closed its bridal shop business in Mentor, Ohio, in light of the pandemic and government orders. There wasn't any physical harm to the bridal shop triggering coverage, he said.

"The most logical reading of the policy is that tangible harm to property is necessary to meet the threshold requirement for coverage. Consequently, because Bridal Expressions fails to plausibly allege a tangible harm to property, the court finds that it is not entitled to coverage under the policy," the judge said.

Kenneth P. Abbarno of DiCello Levitt Gutzler LLC, counsel for the bridal shop, told Law360 on Tuesday that his client believes the court applied an incorrect standard under Ohio law.

"We're disappointed that courts, at this stage of the litigation, are making decisions about the effects of COVID-19 and making policy interpretations before business owners are given the rightful opportunity for fact and expert discovery to define the extent and gravity of the physical damage and losses caused by COVID-19," he said. "Courts are incorrectly taking that rightful opportunity away from policyholders."

Bridal Expressions, like other businesses across the country, suspended operations under government orders intended to help stop the spread of the coronavirus. Social distancing measures upon reopening further hurt the bridal shop's business by reducing the flow of customer traffic, the shop owner said.

Bridal Expressions filed the proposed class action in April 2020, claiming its losses stemmed from no longer being able to service a few families and bridal parties in its store. The owner said its inability to use the bridal shop as it did before COVID-19 was a physical loss or damage under the policy.

In Tuesday's order, Judge Oliver sided with Owners, finding the bridal shop didn't have any "direct physical loss of or damage" to its property triggering coverage according to the language in its policy. The presence of COVID-19 and the loss of the bridal shop's intended use doesn't constitute that sort of loss or damage, he said.

"Several courts in this district have recently considered the phrase 'direct physical loss of or damage to' property in the context of COVID-19 related insurance coverage disputes, and all but one of these courts have concluded that Ohio law requires a tangible injury to trigger insurance coverage for property damage," the judge said.

At the start of the year, an Ohio federal judge ruled an insurer must cover more than a dozen steak and seafood restaurants because of COVID-19 shutdown orders. The judge said the policyholders' business interruption coverage extends to the loss of use of their properties for their intended purpose.

Then another Ohio federal judge asked the state's Supreme Court in an Ohio audiology practice's business interruption suit to address whether the existence of COVID-19 on a property or an infected person's presence at the location is a "direct physical loss or damage" on a covered property.

In February, three Ohio federal judges sided with insurers on the issue of "direct physical loss or damage." The judges held coverage wasn't triggered for a hotel operator, real estate management company and bar and grill for losses arising out of the coronavirus pandemic and government shutdown orders.

Representatives from Owners didn't respond to requests for comment.

The bridal shop is represented by Mark A. DiCello, Kenneth P. Abbarno, Mark Abramowitz, Adam J. Levitt, Amy E. Keller, Daniel R. Ferri, Mark Hamill and Laura E. Reasons of DiCello Levitt Gutzler LLC, Timothy W. Burns, Jeff J. Bowen, Jesse J. Bair and Freya K. Bowen of Burns Bowen Bair LLP and Douglas Daniels of Daniels & Tredennick.

Owners is represented by Lori McAllister, Theodore W. Seitz and Kyle M. Asher of Dykema Gossett PLLC.

The case is Bridal Expressions LLC et al. v. Owners Insurance Co., case number 1:20-cv-00833, in the U.S. District Court for the Northern District of Ohio.

--Additional reporting by Jeff Sistrunk, Daphne Zhang, Joyce Hanson and Hailey Konnath. Editing by Amy Rowe.

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