An Ohio Supreme Court decision has gone in Cincinnati Financial Corp.’s favor on a key business interruption insurance case involving the Covid shutdown.
The Ohio Supreme Court ruled Monday a company’s shutdown during the early days of the pandemic did not constitute a physical loss or property damage covered by insurance. That means companies are not entitled to insurance claims for loss of business while being shut down during the pandemic.
Fairfield-based property and casualty insurance company operator Cincinnati Financial (Nasdaq: CINF) and its Cincinnati Insurance main operating subsidiary have faced numerous lawsuits by companies claiming their losses should be covered by insurance policies that cover physical loss or property damage.
The Ohio Supreme Court’s decision found otherwise. It’s significant not just for this case but for the likely impact on dozens of other similar cases pending in Ohio that have been held up pending the Supreme Court’s ruling. Rulings on those cases will likely be based on this Supreme Court ruling.
The case was originally filed by Youngstown-based Neuro-Communication Services Inc., which owns and operates an audiology practice under the name Hearing Innovations. It provides hearing and balance services to its patients.
During the Covid shutdown in March 2020, Neuro-Communication closed its offices from March 23 to May 4, based on shutdown orders from state officials.
Neuro-Communcation has a commercial insurance policy with Cincinnati Insurance that covers property damage and physical loss. It filed a claim with the insurer for financial losses suffered while its business was shut down due to Covid. Cincinnati Insurance rejected the claim, arguing the losses weren’t due to any physical loss or property damage.
Neuro-Communication then sued Cincinnati Insurance in U.S. District Court in Ohio’s Northern District. That court referred the case to the Ohio Supreme Court for a ruling on whether the presence of the Covid virus causes a direct physical loss or damage to property.
The Supreme Court ruled it does not.
Six of the seven Ohio Supreme Court justices agreed with the decision. Justice Michael Donnelly was the only dissenting justice.
The ruling matches others on the issue involving Cincinnati Financial. The vast majority of similar cases have been decided in its favor while some others are still being litigated.
The Supreme Court referenced numerous precedents that are similar to its decision, including two involving Cincinnati Insurance. Judges in North Carolina and Virginia regarding a West Virginia company ruled in Cincinnati Insurance’s favor.
The cases against Cincinnati Insurance range from being dismissed to dismissed and appealed to a few that have been filed this year and are still being amended, Cincinnati Financial said in its quarterly 10-Q filing with the Securities and Exchange Commission on Oct. 31. Many others have been stayed pending appellate court decisions.
Cincinnati Financial CEO Steve Johnston has said on conference calls with investors and analysts he’s confident the company will prevail on these cases.
“We are confident in our legal strategy given our understanding of the law and decisions made in the majority of other business insurance court cases throughout the country to date,” Johnston said on a conference call in February 2021 as cases arose.
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