Equity Planning Corp. v. Westfield Ins. Co.

Case Digest

 COVID-19-related damages cases are making their way through state and federal courts. Plaintiffs typically are businesses that have suffered economic losses because of various mandatory shutdowns. They file claims with their insurance agency, which frequently denies coverage for business interruption losses. However, more often than not, courts have sided with the defendant’s insurance company and dismissed the plaintiff’s case or ruled against the business owner. The plaintiff, Equity Planning Corp. (EP), is a commercial management and leasing company in the instant case. It leases properties to tenants throughout Ohio and other states. EP alleges that it suffered a loss of use of its properties, resulting in a substantial loss of business income when its tenants were forced to shut down their nonessential businesses during Ohio’s stay-at-home order, thus prohibiting its tenants’ ability to pay rent to EP.

Background

 EP alleges that, at all relevant times, Westfield insured EP under an “all-risk” commercial/business owner policy. The plaintiff submitted a claim for business interruption coverage. The plaintiff’s policy covered loss of business income and loss due to actions of civil authority. The defendant rejected the plaintiff’s claim, resulting in the current litigation. 

Relevant Policy Provisions

 EP’s primary complaint is filed under the civil authority provisions of the policy. “In this Additional Coverage, Civil Authority, the described premises are premises to which this Coverage Form applies, as shown in the Declarations. When a Covered Cause of Loss causes damage to property other than property at the described premises, we will pay for the actual loss of Business Income you sustain and the necessary Extra Expense caused by the action of civil authority that prohibits access to the described premises.” Further, “[w]hen Special is shown in the Declarations, Covered Causes of Loss means direct physical loss unless the loss is excluded or limited in this policy.” “The Policy also contains an endorsement titled Exclusion of Loss Due to Virus or Bacteria.” Part of the text of that exclusion reads: “B. We will not pay for loss or damage caused by or resulting from any virus, bacterium, or other microorganisms that induces or is capable of inducing physical distress, illness, or disease.”

Legal Standard

 Westfield moves to dismiss EP’s failure to state a claim under Fed. Rule. 12(b)(6), which is the standard rule followed in all or most federal court claims. As the rule requires, the court accepts the plaintiff’s factual allegations as true and construes the complaint in the light most favorable to the plaintiff. To survive a motion to dismiss, the facts must show that the claim is plausible and above speculation.

The parties agree that Ohio law applies. As to insurance contracts, Ohio law requires that the contract’s language reflects the parties’ intent. Thus, a court must “look to the plain and ordinary meaning of the language used in the policy unless another meaning is apparent from the contents of the policy.” If the policy language is unambiguous, it is used to decide. If it is ambiguous, then a court may consider extrinsic evidence to determine intent. “This case, like many other COVID-19 coverage cases, turns on whether E.P. can show ‘direct physical loss of or damage to its insured property.”