By Daphne Zhang

Law360 (March 15, 2021, 5:27 PM EDT) -- Indiana's largest nonprofit professional theater lost its bid to force Cincinnati Insurance Co. to pay for its pandemic-related losses after an Indiana state judge ruled that the theater failed to allege that COVID-19 caused property damage.

In her decision to shoot down Indiana Repertory Theater's suit, Judge Heather A. Welch found that a heavily cited Missouri federal case against the same insurer, Studio 417 Inc. v. Cincinnati Insurance Co. , doesn't apply to the theater's claims.

In Studio 417, the policyholder was able to allege that COVID-19 likely attached to its property and caused a direct physical loss covered under the policy, but "IRT has produced no evidence that the virus was ever present at its theatre," the judge said.

The theater's suit echoes claims in over 1,500 lawsuits filed by businesses against their insurers seeking pandemic- and government-shutdown-related coverage. Among the over 250 court decisions issued, around 80% of judges dismissed policyholders' suits, ruling that their properties did not incur "direct physical loss or damage," a precondition for coverage, according to data from the University of Pennsylvania Carey Law School.

On Friday, Judge Welch sided with Cincinnati — and most court rulings on COVID-19 related coverage disputes — finding that the theater failed to allege that the novel coronavirus caused such damage to its property. But she gave the theater additional time to develop evidence.

"COVID-19 has not physically harmed or changed the theatre," the judge said in the order. "There is no business income coverage without structural alteration to property."

George Plews of Plews Shadley Racher & Braun LLP, who represents the theater, told Law360 Monday that they appreciate the hard work the court put into the case but "respectfully disagree" with the court's conclusions that IRT was not able to show a direct physical loss sufficient to trigger the policy protections.

"We do anticipate continuing to litigate, whether that's by appeal or otherwise to try and get this coverage for the folks who came forward and who desperately need it," he said. "We are looking at all the ways to proceed here."

According to the suit, the theater had to cancel the rest of its season last March. IRT has 65 full-time employees, including seasonal workers, and puts on performances between September and May. The theater has maintained that its complete loss of use of its building satisfies the policy's direct physical loss or damage requirement.

But Judge Welch disagreed Friday.

"IRT's loss of use does not have any physical impact on its property. No evidence suggests that the theatre was physically different" after the shutdown order, she said, "the Policy requires physical alteration to the premises to trigger the business income coverage."

Additionally, the state judge said, the evidence provided by Cincinnati "shows that IRT undertook projects at the theatre during the pandemic, demonstrating that the theatre was not uninhabitable."

"This evidence defeats any conclusion that the loss of use IRT experienced had a physical impact on the theatre premises or that the theatre was completely unusable," she added.

Counsel for Cincinnati could not be immediately reached for comment Monday. 

The theater is represented by George Plews, Peter M. Racher, Gregory M. Gotwald, Kevin M. Toner,  and Ryan T. Leagre of Plews Shadley Racher & Braun LLP.

Cincinnati Insurance Co. and its subsidiary Cincinnati Casualty Co. is represented by Dennis M. Dolan of Litchfield Cavo LLP and Richard R. Skiles of Skiles Detrude

The case is Indiana Repertory Theater Inc. v. The Cincinnati Casualty Co., case number 49D01-2004-PL-013137, in the Marion County Superior Court.

--Editing by Andrew Cohen.

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