Ohio Judges Disagree Over COVID-19 And Property Coverage

By Joyce Hanson
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Law360 (February 19, 2021, 5:40 PM EST) -- An Ohio federal judge has ruled that an insurance company isn't obligated to cover a hotel operator for direct physical loss or damage to property due to the COVID-19 pandemic, rejecting the reasoning of another jurist in the same district who favored a restaurant chain in a similar case.

U.S. District Judge J. Philip Calabrese's Thursday decision in the Northern District of Ohio found that The Travelers Indemnity Co. of America policy for hotel operator Ceres Enterprises LLC doesn't provide coverage for losses sustained due to the coronavirus, saying the question before him was a narrow one that turned on the meaning of the language "physical loss of or damage to" in the policy the insurer wrote.

"The court determines that the policy is not ambiguous. The phrase 'physical loss of or damage to' property consists of common words that must be given their ordinary meaning unless manifest absurdity results, or unless some other meaning is clearly evidenced from the face or overall contents of the instruments," Judge Calabrese wrote, citing a 2019 Sixth Circuit decision in In re Fifth Third Early Access Cash Advance Litigation .

The Travelers policy covers the loss of income and expenses due to the suspension of operations during a covered business' period of restoration, and it also covers losses caused by an action of a civil authority that prohibits access to the business' premises, according to Judge Calabrese. But a "virus or bacteria" policy exclusion in the Ceres policy precludes coverage for loss or damage due to illness or disease, the judge said.

"Defendant has carried its burden of showing that the losses plaintiff alleges fall squarely within the policy language of the virus exclusion," Judge Calabrese wrote. "In the court's view, the language of the exclusion is plain and unambiguous and covers the losses plaintiff alleges."

Notably, Judge Calabrese rejected the reasoning of another jurist, U.S. District Judge Dan Aaron Polster, in the same district who granted partial summary judgment on Jan. 19 to restaurant chain Henderson Road Restaurant Systems Inc. and related companies in a similar case.

In his Thursday order, Judge Calabrese spoke to Ceres' reliance on Judge Polster's opinion following Zurich American Insurance Co.'s denial of insurance coverage related to losses the restaurant companies sustained as a result of the pandemic. Judge Polster rebuffed Zurich's argument that tangible structural damage to the restaurants was necessary to satisfy the policy's threshold requirement that business income losses be tied to "direct physical loss of or damage to" property.

According to Judge Calabrese, in both the Ceres and Henderson Road cases, the core issue involves the meaning of the phrase "direct physical loss of or damage to property" in the insurance policy. But while Judge Polster found the language ambiguous and construed it against the insurer, Judge Calabrese said he wasn't persuaded by that reasoning after his "careful review of the plain and ordinary meaning" of the policy language.

Judge Calabrese then pointed specifically to the virus exclusion, saying the Henderson policy's exclusion pertains only to microorganisms.

"Although the parties there debated whether a virus counts as a microorganism, that issue does not arise in this case because the policy here expressly excludes coverage for loss arising, directly or indirectly, from a virus," Judge Calabrese wrote.

However, he did agree with the Henderson decision in one important respect. Quoting directly from Judge Polster's opinion, Judge Calabrese mirrored his fellow jurist's sentiment that "the court must look to the plain meaning of the words, not persuasive authority from other courts."

A Travelers spokesman told Law360 on Friday that the company would not comment beyond what is in the public documents in court.

Representatives for Ceres, the restaurants and Zurich American did not immediately respond Friday to requests for comment.

Ceres is represented by Thomas J. Connick of Connick Law LLC.

Travelers is represented by Michele A. Chapnick of Gregory & Meyer PC and Stephen E. Goldman, Wystan M. Ackerman and Stephani A. Roman of Robinson & Cole LLP.

The restaurants are represented by Mark R. Koberna, Rick D. Sonkin and Sean T. Koran of Sonkin & Koberna LLC.

Zurich American is represented by Kevin M. Young and Jennifer L. Mesko of Tucker Ellis LLP and Jonathan Gross of Mound Cotton Wollan & Greengrass LLP. Bronwyn F. Pollock, Douglas A. Smith, Debra Bogo-Ernst, Evan T. Tager and Archis A. Parasharami of Mayer Brown LLP also represent the insurer.

Judge Calabrese ruled in the case Ceres Enterprises LLC v. The Travelers Indemnity Co. of America, case number 1:20-cv-01925, in the U.S. District Court for the Northern District of Ohio.

Judge Polster ruled in the case Henderson Road Restaurant Systems Inc. d/b/a Hyde Park Grill et al. v. Zurich American Insurance Co., case number 1:20-cv-01239, in the U.S. District Court for the Northern District of Ohio.

--Additional reporting by Jeff Sistrunk. Editing by Orlando Lorenzo.

For a reprint of this article, please contact reprints@law360.com.

Attached Documents

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Case Information

Case Title

Henderson Road Restaurant Systems, Inc., et al. v. Zurich American Insurance Company

Case Number



Ohio Northern

Nature of Suit



Dan Aaron Polster

Date Filed

June 05, 2020

Case Title

Ceres Enterprises, LLC v. Travelers Insurance Company

Case Number



Ohio Northern

Nature of Suit



J. Philip Calabrese

Date Filed

August 28, 2020

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