As a business owner, conducting operations during the COVID-19 era is difficult enough. With so many changes happening daily, oftentimes it can be hard to keep up.

As lawyers, it’s our job to protect our clients from any potential loss or damages. With that said, it is extremely important that business owners do this one thing during the COVID-19 era to prevent future losses.

That one thing is – always reading your insurance policy. This is the most important takeaway from the Ohio federal court’s recent business interruption insurance decision.

Insurance Coverage during COVID-19

Insurance policies appear intimidating and hard to understand because often times they are. However, it could make a difference in the survival of your business. 

In the developing landscape that is business interruption insurance during the time of Coronavirus/COVID-19, a federal court in Ohio bucked the growing trend of previously litigated insurance coverage issues and found an insurer liable under a business interruption policy.

Ohio Case Example: Business Interruption Insurance during COVID-19

Case: HENDERSON ROAD RESTAURANT SYSTEMS, INC., dba Hyde Park Grille, et al. v. ZURICH AMERICAN INS. CO., No. 1:20 CV 1239, 2021 WL 168422, at *1 (N.D. Ohio Jan. 19, 2021).

Business Interruption Policy Case Details

A restaurant chain with locations in five states, one of which is Ohio, filed a claim on its business interruption policy.

In March, 2020, the governor of Ohio issued orders which prohibited restaurants from seating customers inside. As a result, the Plaintiffs attempted to continue its business through takeout orders. That effort quickly failed and forced the Plaintiffs to shut its doors.

Shortly after, the Plaintiffs filed a claim on its business interruption policy. Zurich declined coverage and the Plaintiff sued to enforce the policy terms. 

The Plaintiffs argued the interruption of its business fell within the policy because the loss of income stemmed from the governmental restrictions. Zurich attempted to defend based on the policy’s microorganism exclusion.

Ultimately, the court agreed with the Plaintiff’s interpretation of the policy. The court looked to the language of the policy, interpreted in the Plaintiff’s favor. The policy provided business income coverage for;

The actual loss of “business income” you sustain due to the necessary “suspension” of your “operations” during the “period of restoration”. The “suspension” must be caused by direct physical loss of or damage to property at a “premises” at which a Limit of Insurance is shown on the Declarations for Business Income. The loss or damage must be directly caused by a “covered cause of loss.”

Case: HENDERSON ROAD RESTAURANT SYSTEMS, INC., 2021 WL 168422, at *12 (N.D. Ohio Jan. 19, 2021).

Results of the Business Interruption Policy Case

The court found the Plaintiffs satisfied the conditions set froth above for coverage and declined to apply the microorganism exclusion.

The microorganism exclusion required damage to the Plaintiffs properties to be directly or indirectly caused by, contributed to, or aggravated by the presence, growth, proliferation, spread, or any activity of microorganisms.

None of the Plaintiffs’ properties closed due to the presence of COVID-19, a critical fact to which all parties stipulated.

The closures did not occur due to an outbreak at any of the properties covered by the policy. Closure orders from the relevant governmental entities provided the sole basis for closure of the properties.

Without governmental orders, indoor dining would continue and eventually did resume.

Ultimately, the court determined Zurich could exclude coverage for business interruption due to governmental orders but failed to specifically and expressly exclude governmental action from coverage in this case.

The small details of the Plaintiffs’ policy provided the basis for the court to rule in favor of the Plaintiffs.

Navigating Insurance Policies for Business Owners

At times, insurance policies are not user friendly. If you have reviewed your policy and have questions about the coverage you purchased, consult an attorney.

You paid a premium for your business’s insurance policy and need to know what is contained in that policy. Garcia & Milas, P.C. is happy to discuss any questions or concerns you may have about your insurance coverage.

By Jane I. Milas, Garcia & Milas Managing Director 

Business Law Attorneys in New Haven, Connecticut

For help navigating your business insurance policy, the attorneys at Garcia & Milas are ready to assist employers when navigating your company’s insurance coverage.

Garcia & Milas Law Firm has seasoned Business and Employment Law Attorneys in New Haven, Connecticut and surrounding areas. We advise and represent clients in a variety of business and insurance policy contexts.

Garcia & Milas practices before administrative tribunals and in state and federal courts. Visit our page to learn more about our Labor and Employment Law Practice.

Justin J. Garcia New Haven, CT Attorney

Justin J. Garcia

Attorney in Business Law & Commercial Litigation

Justin J. Garcia advises and represents corporations, associations, owners, general contractors and subcontractors in his commercial and construction law practice, franchisees in his franchise law practice and individual plaintiffs with contract and tort based claims.

Mr. Garcia was named to the New England Rising Stars list as one of the top attorneys in New England in 2018 and 2019.

Before joining Garcia & Milas, Justin practiced law in Chicago and the surrounding counties for four years. Mr. Garcia's experience in both civil and criminal law brings a wealth of court litigation skills to Garcia & Milas Law Firm.

This publication is for general information purposes only and is not and is not intended to constitute legal advice.  The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.

Justin Garcia

Justin Garcia

Justin J. Garcia advises and represents corporations, associations, owners, general contractors and subcontractors in his commercial and construction law practice, franchisees in his franchise law practice and individual plaintiffs with contract and tort based claims. Mr. Garcia was named to the New England Rising Stars list as one of the top attorneys in New England in 2018 and 2019. Before joining Garcia & Milas, Justin practiced law in Chicago and the surrounding counties for four years. Mr. Garcia practiced both civil and criminal law. He represented companies of all sizes, as well as individual plaintiffs and defendants in his civil practice. In his criminal practice Mr. Garcia represented clients accused of simple misdemeanors, to violent felonies to complex federal narcotics charges. Through his civil and criminal practice, Mr. Garcia accumulated a wealth of court litigation experience before bringing his skill set to Garcia & Milas.

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