Exhibit 1
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2021 WL 168422

Only the Westlaw citation is currently available.

United States District Court,

N.D. Ohio, Eastern Division.

HENDERSON ROAD RESTAURANT SYSTEMS,

INC., dba Hyde Park Grille, et al., Plaintiff,

v.

ZURICH AMERICAN INS. CO., Defendant.

CASE NO: 1:20 CV 1239

|

01/19/2021

Dan Aaron Polster, United States District Judge

OPINION AND ORDER

*1 Before the Court are the following motions:

1. Defendant Zurich American Insurance Company's

(“Zurich”) Motion for summary Judgment (ECF Doc. 14);

and

2. Plaintiffs’ Motion for Summary Judgment on the Issue

of Coverage under the Zurich Policy (ECF Doc. 15).

On December 4, 2020, Zurich and Plaintiffs filed opposition

briefs (ECF Doc. 16 and ECF Doc. 17), and on December

18, 2020, both parties filed replies. ECF Doc. 18 and ECF

Doc. 19. On December 23, 2020, Zurich filed a notice of

supplemental authority (ECF Doc. 20), and on December 31,

2020, plaintiff filed a response to the supplemental authority.

ECF Doc. 21.

For the reasons explained below, the Court GRANTS

summary judgment in favor of Plaintiffs on the insurance

coverage issues alleged in Counts I and III of their complaint

and DENIES summary judgment on Count II. Conversely,

the Court DENIES Zurich's motion for summary judgment

on Counts I and III of Plaintiffs’ complaint and GRANTS

summary judgment on Count II.

The Court's order is final and appealable on Counts II and III.

The Court's order is not final or appealable on Count I because

damages have not yet been determined. However, because the

Court's opinion on Count I involves a question of law that will

control the outcome of Plaintiffs’ breach of contract claim, the

Court certifies its order on Count I for interlocutory appeal,

pursuant to 28 U.S.C.S. § 1292(b). An interlocutory appeal

of this dispositive issue will enable the parties to appeal the

legal issue before spending additional time and money on the

issue of damages.

I. Relevant Facts

Plaintiffs, Henderson Road Restaurant Systems, Inc. dba

Hyde park Grille, Coventry Restaurant Systems, Inc., dba

Hyde Park Chop House, Chagrin Restaurants, LLC dba Hyde

Park Prime Steak House, JR Park LLC dba Hyde Park

Prime Steak House, HP CAP LLC, dba Hyde Park Prime

Steakhouse, NSHP, LLC dba Hyde Park Prime Steakhouse,

HPD Restaurant Systems, Inc. dba Hyde Park Prime Steak

House, 457 High Street Development, LLC, CAP Restaurant

Development LLC, RJ Moreland Hills, LLC and Northville

Development, LLC (“Plaintiffs”) operated restaurants in

Ohio, Pennsylvania, Michigan, Indiana and Florida. In the

spring of 2020, state governments issued orders restricting the

operations of restaurants in an effort to abate the spread of

the coronavirus (“COVID-19”). In response to these orders,

Plaintiffs closed all but four of their Ohio restaurants on

March 15, 2020. Those four Ohio restaurants continued to

provide only carry-out dining until March 17, 2020, and then

they closed. ECF Doc. 12 at 6.

Prior to the government closings, Plaintiffs’ restaurants

received very few take-out orders; their businesses were

comprised almost exclusively of in-person dining. ECF Doc.

15-1 at 1 (“Saccone Decl.”) ¶ 4. As a result of the closings,

Plaintiffs were forced to lay off staff and suffered significant

financial losses. Id. ¶ 2. They speculate that some of their

restaurants may never re-open due to new seating capacity

restrictions, and those that have reopened have reduced

staffing and suffered financial loss. 1Id. ¶ 3.

*2 On March 24, 2020, Plaintiffs submitted a claim to Zurich

under commercial insurance policy No. CPO 6220911-06

(“Policy”) 2 for loss of business income caused by the state

orders. ECF Doc. 12 at 7, ¶ 50. Zurich denied coverage on

April 27, 2020. ECF Doc. 12 at 8, ¶ 53. The parties have

identified the following portions of the Policy as relevant to

their dispute:

Business Income Coverage Form

A. COVERAGE
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We will pay 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”. We will not pay more than the applicable Limit

of Insurance shown on the Declarations for Business Income

at that “premises.”

B. ADDITIONAL COVERAGES

1. Civil Authority

We will pay for the actual loss of “business income”

you sustain for up to the number of days shown on the

Declarations for Civil Authority resulting from the necessary

“suspension” or delay in the start of your “operations” if the

“suspension” or delay is caused by order of civil authority

that prohibits access to the “premises” or “reported

unscheduled premises.” That order must result from a civil

authority's response to direct physical loss of or damage

to property located within one mile from the “premises”

or “reported unscheduled premises” which sustains a

“business income” loss. The loss or damage must be directly

caused by a “covered cause of loss”.

ECF Doc. 12-1 at 168.

The Policy defines “Period of restoration” as the time that

begins when:

a. The direct physical loss or damages that causes

“suspension” of your “operations” occurs; or

b. The date “operations” would have begun if the start of

“operations” is delayed because of loss of or damage to

any of the following:

1) “Real property”, whether complete or under

construction;

2) Alterations or additions to “real property”; or

3) “Personal property”:

a. Used in such construction, alterations, or additions;

b. Incidental to the occupancy of the area intended for

construction, alteration, or addition; or

c. Incidental to the alteration of the occupancy of an

existing building or structure.

If you resume “operations”, with reasonable speed, the

“period of restoration” ends on the earlier of:

a. The date when the location where the loss or damage

occurred could have been physically capable of resuming

the level of “operations” which existed prior to the

loss or damage, if the location had been restored to the

physical size, construction, configuration, location, and

material specifications which would satisfy the minimum

requirements necessary to obtain all required building

permits, occupancy permits, operating licenses, or similar

documents; or

b. The date when a new permanent location is physically

capable of resuming the level of “operations” which

existed prior to the loss or damage, if you resume

“operations” at a new permanent location.

If you do not resume “operations”, or do not resume

“operations” with reasonable speed (whether at your

“premises” or “reported unscheduled premises” or

elsewhere), the “period of restoration” will end on the

date when the location where the loss or damage occurred

could have been restored to the physical size, construction,

configuration, location, and material specifications which

existed at the time of loss or damage, with no consideration

for any time:

*3 a.Which would have been required to make changes

in order to satisfy the minimum requirements necessary to

obtain all required building permits, occupancy permits,

operating licenses, or similar documents; and

b. Which would have been necessary to make the location

physically capable of resuming the level of “operations”

which existed prior to the loss or damage after the

completion of repairs, replacement or rebuilding.

“Period of restoration” does not include any increased

period required due to the enforcement of any ordinance or

law that requires any insured or others to test for, monitor,

clean up, remove, contain, treat, detoxify or neutralize or

in any way respond to, or assess the effects of “pollutants”

or “microorganisms.”

The expiration of this policy will not cut short the “period of

restoration.” ECF Doc. 12-1 at 94.

The Policy defines “covered cause of loss” as “a fortuitous

cause or event, not otherwise excluded, which actually occurs
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during this policy period.” ECF Doc. 12-1 at 86. The Business

Income Coverage Form states, in relevant part:

c. EXCLUSIONS

1. Real or Personal Property

The exclusions * * * below and the excluded causes of loss

in the REAL AND PERSONAL PROPERTY COVERAGE

FORM, except Off-Premises Service Interruption, apply to

loss of “business income” caused by or resulting from loss

of damage to any property * * *”

ECF Doc. 12-1 at 171.

The Real and Personal Property Coverage Form includes the

following exclusions:

B. EXCLUDED CAUSES OF LOSS

11. Loss of Market or Delay

We will not pay for loss or damage caused by or resulting from

loss of market, loss of use, or delay. This exclusion applies

even if one of these excluded causes of loss was caused by or

resulted from a “mistake” or “malfunction.”

12. Microorganisms

We will not pay for loss or damage consisting of, directly

or indirectly caused by, contributed to, or aggravated by the

presence, growth, proliferation, spread, or any activity of

“microorganisms”, unless resulting from fire or lightning.

Such loss or damage is excluded regardless or any other

cause or event, including a “mistake” or “malfunction,”

or weather condition, that contributes concurrently or in any

sequence to the loss, even if such other cause or event would

otherwise be covered.

But if a result of one of the excluded causes of loss is a

“specified cause of loss”, other than fire or lightning, we

will pay that portion of the loss or damage which was solely

caused by that “specified cause of loss”.

We will also not pay for loss, cost, or expense arising out

of any request, demand, order, or statutory or regulatory

requirement that requires any insured or others to test for,

monitor, clean up, remove, treat, detoxify, or neutralize,

or in any way respond to, or assess the effects of

“microorganisms”.

ECF Doc. 12-1 at 106.

On April 30, 2020, Plaintiffs filed this case in the Cuyahoga

County Court of Common Pleas. ECF Doc. 1-2. Plaintiffs

asserted a claim for breach of contract (Count I), a claim

for bad faith denial of coverage (Count II), and a claim for

declaratory judgment (Count III). ECF Doc. 1-2 at 15-16.

Defendant removed the case to federal court on June 5, 2020.

ECF Doc. 1. The parties filed stipulated facts on October 27,

2020, which state in relevant part:

*4 44. None of Plaintiffs’ Insured Premises were closed

as the result of the known or confirmed presence of SARSCoV-2 or COVID 19 at any of the Insured Premises.

* * *

46. Plaintiffs did not provide any delivery, carry-out,

take-out and/or curbside service from any of its Insured

Premises while they were closed, [with the exception of the

four Ohio locations.]

47. There were no known or presumed infected person(s)

with COVID-19 at any of the Insured Premises at any time

from March 15, 2020 to April 27, 2020.

48. There was no physical alteration or structural damage to

any property at an Insured Premises any time from March

15, 2020 to April 27, 2020.

49. There was no physical obstruction affecting ingress or

egress to any of the Insured Locations at any time from

March 15, 2020 to April 27, 2020.

ECF Doc. 12 at 7.

II. Statement of the Parties’ Arguments 3

A. Zurich's Motion for Summary Judgment

Zurich filed its motion for summary judgment on October 30,

2020. Zurich argues that it is entitled to declaratory judgment

because Plaintiffs’ losses were not covered by the Policy as

a matter of law. Zurich contends that Plaintiffs’ economic

losses are not covered by the Policy because they were not

caused by “physical loss or damage to property.” ECF Doc.

14 at 13. In support of this argument, Zurich does not rely

directly on the Policy's language; rather, it relies on case law

interpreting language from other Ohio insurance policies. See

e.g., Mastellone v. Lightning Rod Mut. Ins. Co., 175 Ohio

App.3d 23, 2008-Ohio-311, 884 N.E.2d 1130 (8th Dist.);

Universal Image Prods., Inc. v. Fed. Ins. Co., 475 F. App'x

569, 573 (6th Cir. 2012); Schmidt v. Travelers Indem. Co. of
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Am., 101 F. Supp. 3d 768, 781, (S.D. Ohio 2015); Santo's

Italian Café LLC dba Santosuossos Pizza Pasta Vino v. Acuity

Insurance Co., No. 1:20 cv 01192 (N. D. Ohio Dec. 21, 2020),

ECF Doc. 20-1.

Alternatively, Zurich argues that, even if there had been

direct physical loss to Plaintiffs’ property, the Microorganism

exclusion would exclude coverage. Simply summarized,

Zurich argues that the underlying cause of loss was

COVID-19; that COVID-19 is a microorganism; and that the

Microorganism exclusion applies. ECF Doc. 14 at 19.

Zurich also contends that the additional Civil Authority

provision does not apply because the states’ orders did not

“prohibit access” to Plaintiffs’ premises. Zurich argues that

the states’ orders permitted Plaintiffs to continue to operate

on a carry-out and delivery basis and, therefore, did not

prohibit access to Plaintiffs’ restaurants as required by the

Policy. Zurich also argues that the Civil Authority coverage

is inapplicable because the states’ orders did not respond to a

direct physical loss of or damage to property located within

one mile from the premises. ECF Doc. 14 at 16. Zurich cites

other federal cases holding that civil authority provisions do

not provide coverage in the COVID-19 context. See, e.g.,

Mudpie, Inc. v. Travelers Cas. Ins. Co. of Am., No. 20-

cv-03213, 2020 U.S. Dist. LEXIS 168385 at *19 (N.D. Cal.

Sept. 23, 2020).

*5 Finally, Zurich argues that, because it properly denied

coverage, it is entitled to summary judgment on Plaintiffs’ bad

faith claim. Zurich argues that, even if the Court decides that

coverage exists, its denial was not “arbitrary or capricious.”

ECF Doc. 14 at 18.

Plaintiffs filed a memorandum in opposition on December

4, 2020. ECF Doc. 17. Plaintiffs argue that Zurich could

have easily drafted the Policy language to limit coverage to

physical or structural alteration/damage to tangible property.

Instead, Zurich chose the language “direct physical loss of

or damage to property.” Plaintiffs argue that “direct physical

loss of” includes an inability to possess something in the

real, material or bodily world, and that the government

orders caused Plaintiffs to lose their property in this manner.

Plaintiffs point out that Zurich's Policy does not state that

“direct physical loss of or damage to property” required

“physical alteration or structural damage to any property at

the Insured Premises.”

Plaintiffs also contend that Zurich's cases are not on point.

Plaintiffs argue that different policy language was involved

in Mastellone; the court found that there was no evidence

that the building was substantially “unusable” in Universal

Image; and the Schmidt decision determined that a fraudulent

cashier's check did not constitute “physical loss of or damage

to property.” ECF Doc. 17 at 9-10.

Instead, Plaintiffs argue that the Court should find persuasive

North State Deli, LLC, v. Cincinnati Ins. Co., No. 20 CVS

02569, 2020 N.C. Super LEXIS 38 (N.C. Super Ct. Oct.

7, 2020), which decided that the ordinary meaning of the

phrase “direct physical loss” included the inability to possess

something in the real, material or bodily world, resulting from

a given cause without the intervention of other conditions.

Plaintiffs also cite Cajun Conti LLC v. Certain Underwriters

at Lloyd's, No. 2020-02558 (La Dist. Ct. Nov. 4, 2020)

in which the court denied an insurer's dispositive motion

because the restaurant had to drastically change its operations

to exclude sit-down customers who were the majority of the

restaurant's patrons. ECF Doc. 17 at 12.

Plaintiffs argue that even if the Court finds that the Policy's

“direct physical loss of or damage to property” language does

not unambiguously provide coverage for their claims, that the

language is, at a minimum, ambiguous. And, if the language is

ambiguous, the Court must construe it in favor of the insured

and against the insurer. Neal-Pettit v. Lahman, 125 Ohio St.3d

327, 2010-Ohio-1829, 928 N.E.2d 421, 424 (Ohio 2010).

Plaintiffs also argue that the government closure cases cited

by Zurich are distinguishable. Plaintiffs argue that Diesel

Barbershop, LLC v. State Farm Lloyds, No. 5:20 CV 461-

DAE, 2020 U.S. Dist. LEXIS 147276 (W.D. Tex. Aug. 13,

2020) and Sandy Point Dental, PC v. Cincinnati Ins., Co.,

2020 U.S. Dist. LEXIS 171979 (N.D. Ill. Sept. 21, 2020)

involved policies that only covered “accidental direct physical

loss to” or “direct physical loss to property.” Plaintiffs argue

that here, the Policy language covering “direct physical loss

of or damage to property” is more expansive and must be

interpreted differently.

Plaintiffs also argue that 10e v. Travelers Indem. Co.,

2:20 CV 04418-SVW-AS, 2020 U.S. Dist. LEXIS 165252

(C.D. Cal. Sept. 2, 2020) and Pappy's Barber Shops, Inc.

v. Farmers Grp., Inc., No.: 20-CV 907-CAB-BLM, 2020

U.S. Dist. LEXIS 166808 (S.D. Cal. Sept. 11, 2020) are

inapposite. In those cases, the courts imposed a “permanent

dispossession” requirement that was not based on any
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language in the relevant policies but on a different case.

Plaintiffs also distinguish Malaube, LLC v. Greenwich Ins.

Co., No. 20-22615, 2020 U.S. Dist. LEXIS156027 (S.D.

Fla. Aug. 26, 2020) and Infinity Exhibits, Inc. v. Certain

Underwriters at Lloyd's London, No. 8:20 cv 1605-T-30-

AEP, 2020 U.S. Dist. LEXIS 182497 (M.D. Fla. Sept. 28,

2020) both of which relied on Mama Jo's, Inc. v. Sparta Ins.

Co., 823 F. App'x 868 (11th Cir. 2020), a case which involved

reduced business due to construction dust that needed to be

cleaned before the premises could be used for their intended

purpose. ECF Doc. 17 at 18.

*6 Plaintiffs argue that the Microorganism exclusion does

not apply because COVID-19 was not the underlying cause

of Plaintiffs’ loss. Plaintiffs acknowledge that the government

closure orders were issued in response to COVID-19, but

argue that they were not actually caused by COVID-19.

They argue that the Anti-Concurrent causation language

does not exclude coverage because Zurich's interpretation of

that clause would expand the Microorganism exclusion far

beyond anything the parties could have reasonably intended

or understood. ECF Doc. 17 at 22. They also argue that a virus

is not technically a Microorganism. ECF Doc. 17 at 23.

Finally, Plaintiffs concede that, if the Court finds that Zurich

properly denied coverage, Plaintiffs’ bad faith claim should

be summarily dismissed. However, if the Court finds that

there is coverage, Plaintiffs request that they be given more

time to conduct discovery and refile their motion for summary

judgment on the bad faith claim. ECF Doc. 17 at 19-20.

Zurich filed a reply on December 18, 2020. ECF Doc. 18.

Zurich argues that the Court should follow the “growing

consensus among federal courts” that have dismissed

COVID-19 business interruption claims because the insured

parties did not sufficiently allege or prove physical loss

or damage. Zurich also argues that the Policy's business

interruption provision cannot be read as a stand-alone policy;

it must be read as a part of the entire policy – a policy related

to the Plaintiffs’ physical property.

Zurich continues to argue that Plaintiffs cannot avoid the

plain language of the Microorganism exclusion. Zurich

argues that the Policy clearly excludes coverage for damages

caused directly or indirectly by viruses and that there is no

need for the Court to consider the dictionary definitions of

microorganisms. Zurich argues that Plaintiffs’ losses were

caused by COVID-19 and that the governmental orders were

issued in direct response to the virus. Zurich also continues

to argue that it should not be estopped from arguing that the

Microorganism exclusion applies.

B. Plaintiffs’ Motion for Summary Judgment

Plaintiffs filed a cross-motion for summary judgment on

October 30, 2020. ECF Doc. 15. Plaintiffs argue that they are

entitled to business income coverage under the plain language

of the Policy. As stated above, the Business Income Coverage

provides:

We will pay 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”.

In accordance with this language, Plaintiffs argue that they

are entitled to coverage if they show that 1) they necessarily

suspended their operations; 2) they suffered a loss of business

income due to the suspension of their operations; 3) the

suspension was caused by a direct physical loss of or damage

to property a premises, and 4) the loss or damage was directly

caused by a covered cause of loss. ECF Doc. 14 at 5. Plaintiffs

argue that they have shown each of these facts and are entitled

to coverage under the plain language of the Policy. ECF Doc.

15 at 5-15.

Plaintiffs also argue that none of the Policy's exclusions

preclude coverage. First, they contend that, under the Policy's

plain language, the Microorganism exclusion does not apply.

They further assert that Zurich should be estopped from

arguing that this exclusion applies based on its 2006

representations to the Ohio Department of Insurance when

the exclusion was first approved for inclusion in property

casualty insurance policies. ECF Doc. 15 at 15-20. Plaintiffs

also argue that the Loss of Market or Delay exclusion does not

apply. They contend that the purpose of the business income

coverage would be completely undermined if the “loss of use”

exclusion applied. (ECF Doc. 15 at 20).
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*7 Zurich filed a response in opposition to Plaintiffs’

motion for summary judgment on December 4, 2020. ECF

Doc. 16. Zurich argues that coverage under the Policy

required permanent dispossession and that the states’ orders

did not permanently dispossess Plaintiffs of their property

or terminate their leasehold rights. Zurich asserts that the

states’ orders did not preclude Plaintiffs from entering their

premises and using them for carry-out and delivery service.

Zurich also argues that the Court should reject Plaintiffs’

interpretation of the language “physical loss of or damage to

property.” ECF Doc. 16 at 3-4. Zurich cites several federal

cases applying California law and rejecting similar attempts

to expand coverage by focusing on this language. See, e.g.

10E, LLC v. Travelers Indem. Co., Case No. 2:20 cv 04418,

2020 U.S. Dist. LEXIS 217482 (C.D. Cal. Nov. 13, 2020);

Pappy's Barber Shops, Inc. v. Farmers Group, Inc., Case No.

20 CV 907- CAB-BLM, 2020 U.S. Dist. LEXIS 166808 at

*11 (S. D. Cal. Sept. 11, 2020); Mark's Engine Co. No. 28

Rest., LLC v. Travelers Indem. Co. of Connecticut, No. 2:20

CV 04423-AB-SK, 2020 U.S. Dist. LEXIS 188463 at * 10

(C. D. Calif. Oct. 2, 2020).

As already argued in its motion for summary judgment,

Zurich argues here that there is a growing consensus of

cases around the country that have held that the business

interruptions caused by COVID-19 do not involve the

physical loss of or damage to property necessary to trigger

coverage under a first-party commercial property policy.

Zurich continues to assert that Ohio law provides that “direct

physical loss” requires “harm to the property that adversely

affects the structural integrity of the [premises].” ECF Doc.

16 at 5-6. Zurich contends that the cases cited by Plaintiffs are

inapposite. ECF Doc. 16 at 6-8. Zurich also cites the Policy's

“Period of Restoration” definition in support of its argument

that the Policy requires a “physical” loss. Zurich argues

that the fact the Business Income Coverage ends when the

location is physically capable of resuming operation supports

its argument that “loss” must be of a physical nature. ECF

Doc. 16 at 8-10.

Zurich argues again that the Microorganism exclusion bars

coverage and that the governmental orders were issued in

response to the SARS-CoV2 virus and COVID-19 disease.

Zurich argues that the Microorganism exclusion applies

to all loss “directly or indirectly caused by, contributed

to, or aggravated by the ... spread, or any activity of

‘microorganisms.’ ” Zurich argues that it should not be

estopped from arguing that the microorganism exclusion

applies because Ohio has not recognized the doctrine

of regulatory estoppel and, even if it had, it would be

inapplicable here. ECF Doc. 16 at 12-14.

Zurich argues that the loss of use exclusion also bars

coverage. Zurich argues that its interpretation of this

exclusion is not non-sensical (as argued by Plaintiffs) because

it does not bar coverage when there is physical damage –

which Zurich argues is necessary for coverage. ECF Doc. 16

at 14. Finally, Zurich points out that Plaintiffs did not move

for summary judgment on the Civil Authority provision of the

Policy and are not entitled to coverage on that ground. ECF

Doc. 16 at 14-15.

Plaintiffs filed a reply brief on December 18, 2020. ECF

Doc. 19. Plaintiffs construe Zurich's argument regarding

“permanent” dispossession of property as a concession

that direct physical loss of property could mean “being

dispossessed of covered property.” However, Plaintiffs

contend that the “permanent” requirement is not supported

by the Policy language. Citing the Policy's definition of

“suspension,” Plaintiffs argue that the Policy provides

coverage both when there is a cessation or a “slowdown”

of business activities. ECF Doc. 12-1 at 101. Accordingly,

Plaintiffs contend that Zurich's argument for “permanent”

dispossession finds no support in the Policy.

*8 Plaintiffs also distinguish the Total Intermodal Servs. v.

Travelers Prop. Cas. Co. of Am., 17-cv-04908, 2018 U.S.

Dist. LEXIS 216917 (C.D. Cal. July 11, 2018) case cited

by Zurich in support of its argument that physical loss of

the premises requires permanent dispossession. The Total

Intermodal court acknowledged that the same phrase in a

different kind of insurance contract could mean something

else. Plaintiffs also point out that, unlike Zurich's Policy,

Travelers’ policy provided coverage for “sums [the insured

became] legally obligated to pay as damages as a Motor

Carrier, Warehouseman, Freight Forwarder, Logistics Service

Provider or Other Bailee for direct physical loss of or damage

to covered property.” Id., at *3-4.

Plaintiffs also contend that the “Period of Restoration”

definition does not redefine the business income coverage.

Plaintiffs argue that, under the unambiguous language of the

Policy, the “Period of Restoration” began on the dates the

relevant government orders went into effect and ended or will

end on the dates the in-person dining restrictions were/are

fully lifted. ECF Doc. 19 at 9.
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Plaintiffs continue to argue that Zurich should be estopped

from arguing that the Microorganism exclusion applies based

on Zurich's past representations to the Ohio Department of

Insurance. And, they continue to argue that the Policy's loss of

market or delay exclusion cannot be interpreted as completely

canceling the Business Income coverage. ECF Doc. 19 at

12-13.

C. Zurich's Supplemental Authority

On December 23, 2020, Zurich filed supplemental authority

in support of its motion for summary judgment. The

supplemental authority is a Memorandum of Opinion and

Order granting an insurer's motion to dismiss in Santo's

Italian Café LLC dba Santosuossos Pizza Pasta Vino v. Acuity

Insurance Company, No. 1:20 cv 00192 (N.D. Ohio Dec.

21, 2020). This supplemental authority embraces some of

Zurich's arguments. Specifically, the Santo's court, relying

on Mastellone and Universal Image Prods, Inc., found that

plaintiff failed to plead a threshold claim of ‘direct physical

loss of or damage to’ its premises and that the government

orders did not constitute a “physical intrusion on Santo's

property.” The Santo's court also accepted the insurer's

interpretation of the period of restoration term and decided

that coverage was excluded under the insurer's policy's virus

exclusion, as argued by Zurich in the instant case.

On December 31, 2020, Plaintiffs filed a response to Zurich's

notice of supplemental authority. ECF Doc. 21. Plaintiffs

argue that the Santo's court uncritically transmuted “physical

injury” to mean “physical loss of or damage to” without

explaining why these different terms should be interpreted

the same. Plaintiffs further contend that the “period of

restoration” set forth in the Santo's case was different that

the language here, and that the Santo's decision provides

minimal insight into Zurich's microorganism exclusion. In

short, Plaintiffs’ argue that the Santo's decision does not

bolster Zurich's argument, and that this Court should not be

persuaded by its holding.

III. Law & Analysis

A. Standard of Review

Summary judgment will be granted if the pleadings,

depositions, answers to interrogatories, and admissions on

file, together with the affidavits, if any, show that “there is

no genuine dispute as to any material fact and the movant is

entitled to a judgment as a matter of law.” Fed. R. Civ. P. 56(a).

The movant bears the initial burden of showing that there is

no material issue in dispute. Id. at 607 (citing Celotex Corp. v.

Catrett, 477 U.S. 317, 323 (1986). Here, the parties have filed

cross-motions for summary judgment and agree that the Court

must determine whether the language contained in Zurich's

Policy is ambiguous as a matter of law. See Potti v. Duramed

Pharm., Inc., 938 F.2d 641, 647 (6th Cir. 1991).

B. Ohio Law Interpretation of Insurance Contracts

*9 A federal court sitting in diversity applies the substantive

law of the state in which it sits. Hayes v. Equitable Energy

Res. Co., 266 F.3d 560, 566 (6th Cir. 2001). Because this

Court is located in Ohio, it must apply Ohio law to the

Zurich policy. 4 Courts generally apply contract law when

interpreting insurance policies. St. Mary's Foundry Inc. v

Emp'rs Ins. of Wausau, 332 F.3d 989. Determining whether

language in an insurance policy is ambiguous is a matter of

law decided by the Court. Potti v. Duramed Pharm., 938 F.2d

641, 647.

A court must “look to the plain and ordinary meaning of

the language used in the policy unless another meaning is

clearly apparent from the contents of the policy.” Westfield

Ins. Co. v. Galatis, 100 Ohio St.3d 216, 2003-Ohio-5849,

797 N.E.2d 1256, ¶ 11. However, “where provisions of a

contract of insurance are reasonably susceptible of more than

one interpretation, they will be construed strictly against

the insurer and liberally in favor of the insured.” King v.

Nationwide Ins. Co., 35 Ohio St. 3d 208, 519 N.E.2d 1380,

1383 (Ohio 1988). The Ohio Supreme Court has repeatedly

affirmed this bedrock principle of law. See, e.g., Faruque v.

Provident Life & Acci. Ins. Co., 31 Ohio St. 3d 34, 508 N.E.2d

949, 952 (Ohio 1987) (“Language in a contract of insurance

reasonably susceptible of more than one meaning will be

construed liberally in favor of the insured and strictly against

the insurer.”) (quoting Buckeye Union Ins. Co. v. Price, 39

Ohio St. 2d 95, 313 N.E.2d 844 (Ohio 1974); Thompson v.

Preferred Risk Mut. Ins. Co., 32 Ohio St. 3d 340, 513 N.E.2d

733, 736 (Ohio 1987) (“[I]t is beyond question that any

ambiguity will be resolved in favor of the insured and against

the insurer.”); Marusa v. Erie Ins. Co., 136 Ohio St. 3d 118,

2013-Ohio-1957, 991 N.E.2d 232, 234 (“Because the cause

before us involves the interpretation of an insurance contract,

any ambiguities will be construed strictly against the insurer

and liberally in favor of the insured.”) (citation omitted).

When a contract is subject to more than one interpretation,

“the insurer must establish not merely that the policy is

capable of the construction it favors, but rather that such

interpretation is the only one that can fairly be placed on the
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language in question.” Andersen v. Highland House Co., 93

Ohio St.3d 547, 2001-Ohio-1607 (Ohio 2001); Bosserman

Aviation Equip., Inc. v. U.S. Liab. Ins. Co., 183 Ohio App.

3d 29, 2009- Ohio 2526, 915 N.E.2d 687, 692-93 (Ohio Ct.

App. 2009) (emphasis added); see also Lane v. Grange Mut.

Companies, 45 Ohio St. 3d 63, 543 N.E.2d 488, 490 (Ohio

1989) (“[A]n exclusion from liability must be clear and exact

in order to be given effect.” (citation omitted).

C. The Plain Language of the Policy

1. Ambiguity

*10 The parties agree that Ohio law applies and that

the Court must determine whether the Policy's language is

ambiguous. Thus, the Court must first decide whether the

Policy language is reasonably susceptible of more than one

interpretation. As explained below, it is.

Zurich's Policy provides that it will pay for “direct physical

loss of or damage to ‘real property’...” ECF Doc. 12-1 at

104. Based on this language, Plaintiffs argue that physical loss

of the real property means something different than damage

to the real property, and this is a valid argument. Otherwise,

why would both phrases appear side-by-side separated by

the disjunctive conjunction “or”? Plaintiffs argue that they

lost their real property when the state governments ordered

that the properties could no longer be used for their intended

purposes – as dine-in restaurants. The Policy's language is

susceptible to this interpretation.

Zurich does not focus on the language in the Policy. Instead,

it argues that this Court must apply Ohio law interpreting

the Policy language. But Zurich has not cited any Ohio

cases interpreting the same language and applying it to

real property. Zurich primarily relies on the Ohio Court of

Appeals’ decision in Mastellone v. Lightning Rod Mut. Ins.

Co., 175 Ohio App.3d 23. The Mastellone case involved a

claim submitted on a residential homeowners’ policy, which

did not provide business income coverage. The Mastellone

policy provided coverage for direct loss to property “only

if that loss is a physical loss to property,” and it excluded

coverage for loss caused by “smog, rust or other corrosion,

mold, wet or dry rot.” Id. at ¶ 60. Because the policy did

not define “physical loss to property” the court found that

coverage required a “physical injury.” 5 The Mastellone court

then construed “physical injury” to mean “a harm to the

property that adversely affects the structural integrity of the

house.”

Zurich urges this Court to apply the Mastellone definition of

“physical loss to” or “physical injury” to its policy and deny

coverage on that basis. But the policy in Mastellone did not

cover “direct physical loss of or damage to” the premises;

it expressly specified that it would cover loss “only if that

loss [was] physical loss to property.” Here, Zurich's policy

does not expressly limit coverage to physical loss to property;

it extends coverage to direct physical loss of property as

well. There is no reason to believe that the Ohio Court of

Appeals would have interpreted the Zurich Policy language

as it did the homeowners’ policy in Mastellone. The distinct

Policies used different language and were applied to different

facts. Thus, the Mastellone decision offers little guidance in

interpreting Zurich's Policy.

Zurich also cites Universal Image Prods., Inc. v. Fed. Ins.

Co., 475 F. App'x 569, 573 (6th Cir. 2012) for the proposition

that Ohio law requires “tangible, physical losses,” not mere

“economic losses.” ECF Doc. 14 at 9. In Universal Image,

the Sixth Circuit applied Michigan law to a policy providing

coverage for ““direct physical loss or damage to building

or personal property.” The Universal Image insurance policy

specified that “building” did not mean “land, water or air,

either inside or outside of the structure.” The air quality in

the Universal Image commercial property had been affected

by a bacterial contamination in the buildings ductwork. But

given the policy's language, the Sixth Circuit upheld summary

judgment in favor of the insurer. In doing so, the Sixth Circuit

considered case law from other states that had interpreted the

insurance term “physical damage.” The Sixth Circuit cited

Mastellone for the proposition that mold does not constitute

“physical damage” because “[t]he presence of mold did

not alter or otherwise affect the structural integrity of the

[property]”. Universal Image, 475 F. App'x at 573.

*11 Like the Mastellone decision, the Universal Image

decision did not interpret the same policy language as in

the Zurich policy. Moreover, the Sixth Circuit's reference to

Mastellone was only dicta and was directly related to mold

contamination to a property. Consequently, the Universal

Image decision provides very little guidance to the Court

when interpreting Zurich's policy language.

Zurich also cites Schmidt v. Travelers Indemnity Co. of

America, 101 F. Supp.3d 768, 781 (S.D. Ohio 2015) in which

the court held that the alleged loss was not covered because

there was no “ ‘direct physical loss of or damage to’ the

cashier's checks because they were not physically lost or

damaged, unlike [such as being] destroyed and lost in a fire.”
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ECF Doc. 14 at 14. The Traveler's policy further specified that

“Covered Causes of Loss” are “DIRECT PHYSICAL LOSS

unless the loss is” limited or excluded.

Unlike the other two Ohio cases cited by Zurich, the policy

language in Schmidt is similar to Zurich's policy in that it

provides coverage for “direct physical loss of or damage to”

property. However, in Schmidt the insured sought coverage

for a loss of personal property (cashier's checks), and the

checks had not been lost or damaged. They were fraudulent.

Thus, in Schmidt the interpretation and application of the

policy language was relatively straight-forward. The court

granted summary judgment because there had been no

physical loss of or damage to the cashier's checks. The insured

in Schmidt did not show that the policy language (as applied

to the cashier's checks) was susceptible of more than one

interpretation. But the application of the language “loss of” to

personal property is different than it is to real property. Here,

Plaintiffs experienced a loss of their real property – property

which they had been using for dine-in customers.

Zurich contends that the state orders did not preclude

Plaintiffs from using their property, because they were still

permitted to use them for take out orders. However, Zurich

has not disputed that prior to the states’ orders, Plaintiffs’

properties were used almost exclusively for in person dining.

Saccone Decl., ¶ 4, ECF Doc. 15-1 at 2. Nor has Zurich

asserted any facts showing that Plaintiffs would have been

able to realistically transition their businesses to take-out

restaurants or that they could have still used their properties

(which were mostly used for dine-in customers) for take-out

orders.

Zurich also argues that there is no coverage under the Policy

because Plaintiffs did not permanently lose their properties.

Zurich cites a case interpreting similar policy language and

holding that coverage required a “permanent” loss, Real

Hosp., LLC v. Travelers Cas. Ins. Co. of Am., Case No. 2:20 cv

00087-KS-MTP, ___ F. Supp.3d ___, 2020 U.S. Dist. LEXIS

208599 (S.D. Miss. Nov. 4, 2020). The Real Hospitality court,

applying Mississippi law (similar to Ohio's), rejected the

plaintiffs argument that the “loss of” their property due to

a closure in response to governmental orders was covered

under the Travelers policy because the loss had not involved

a “permanent dispossession” of real property. In requiring

a permanent loss, the court stated that it was following the

insurer's logical approach to the phrase “loss of,” and it

cited Total Intermodal Servs. v. Travelers Prop. Cas. Co. of

Am.,Case No. CV 17-4908, 2018 U.S. Dist. LEXIS 216917,

another case examining the language “direct physical loss of

or damage to Covered Property.”

*12 But in Total Intermodal, the court rejected the

insurer's argument that “loss of” and “damage to” were

interchangeable phrases. Rather, the court held that each

phrase must be given its own meaning. The Total Intermodal

court properly construed the language and gave each phrase

its “ordinary and popular sense.” Id. at *8-10. And, in

holding that “loss of” included a “permanent dispossession”

of something, the court chose one popular definition, but

recognized that “the same phrase in a different kind of

insurance contract could mean something else, and that the

issue here is simply whether the phrase “loss of” includes

physical dispossession in the absence of physical damage.

The Court therefore uses the word “includes” to make clear

that its construction is non-limiting.” Id. at fn. 4. Given this

court's explanation, it is difficult to understand why the Real

Hospitality court relied on Total Intermodal to support the

insurer's approach to the phrase “loss of.”

Moreover, by accepting the “logical” approach of the insurer's

interpretation of “loss of” as a “permanent dispossession,” the

Real Hospitality court construed Travelers’ policy language -

language chosen by Travelers – in Travelers’ favor. As shown

below, the standard definitions of the word “loss,” a word

not otherwise defined by Zurich's policy, is not limited to

“permanent dispossession.” The word lost does not always

involve permanency, and real property can be lost and later

returned or restored. If a term is not defined in the policy,

the Court must look to the plain meaning of the words, not

persuasive authority from other courts. Zurich's Policy did not

require a permanent “loss of” property and permanency is not

embodied in the definition of loss. Adding this requirement

would only be interpreting an ambiguous term in favor of the

insurer – something Ohio law does not permit.

Zurich correctly argues that the Court must apply Ohio

law to the interpretation of its Policy. Ohio law provides

that if a policy is reasonably susceptible of more than one

interpretation, it must be construed strictly against the insurer

and in favor of the insured. See, King v. Nationwide Ins.

Co., 35 Ohio St. 3d at 208. Here, because Zurich's Policy

is susceptible of more than one interpretation, it must be

construed liberally in favor of the insureds, i.e., Plaintiffs.

Zurich has not cited any Ohio law constraining this Court to

its interpretation of the Policy. And because there is more than

one interpretation, the Policy must be construed liberally in

Plaintiffs’ favor. As further explained below, when the Policy
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is liberally construed in Plaintiffs’ favor, it provides coverage

for Plaintiffs’ lost business income.

2. Coverage 6

Zurich's policy provides 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.”

ECF Doc. 12-1 at 168.

Plaintiffs have shown that there was a suspension of

their operations. The Policy defines “suspension” as “[t]he

slowdown or cessation of your business activities.” ECF

Doc. 12-1 at 101. It defines “operations” as “[y]our business

activities occurring at the covered location prior to the

physical loss or damage;” and “[t]he location is tenantable

prior to the physical loss or damage.” The parties stipulated

that the Plaintiffs closed their premises on various dates in

response to the states’ orders. ECF Doc. 12 at 6-7. Thus,

Plaintiffs have shown that there was a necessary “suspension”

or “slowdown or cessation” of their business activities.

*13 Plaintiffs have shown that there was a loss of business

income due to the suspension of their operations. The Policy

defines “business income” as “Net income”; plus “Continuing

expenses.” ECF Doc. 12-1 at 84. “Net income” means “the

net profit or loss, including rental income from tenants, that

would have been earned or incurred before taxes.” ECF Doc.

12-1 at 200. “Continuing expenses” is defined as:

a. Your continuing normal operating expenses including,

but not limited to:

1) Payroll;

2) Rental payments as tenants; and

3) Factory overhead; and

* * *

Plaintiffs have submitted the declaration of Joseph Saccone

stating that Plaintiffs have suffered significant financial losses

as a result of the government closures. ECF Doc. 15-1 at 1.

And Zurich does not deny that Plaintiffs have suffered a loss

of business income.

Plaintiffs argue that, because the Policy does not define

“physical,” “loss,” “damage,” or “property,” the Court should

consider Webster's Dictionary to define these terms:

Definition of physical 72 a : having material existence :

perceptible especially through the senses and subject

to the laws of nature everything physical is measurable by

weight, motion, and resistance— Thomas De Quincey

b : of or relating to material things Definition of loss 8

1 : DESTRUCTION, RUIN

// to save the world from utter loss— John Milton 2 a :

the act of losing possession : DEPRIVATION //loss of sight

Definition of damage 9

1 : loss or harm resulting from injury to person, property, or

reputation

// flood damage // sustained severe damage to her knee; 2

damages plural : compensation in money imposed by law for

loss or injury

// The judge awarded them $5,000 in damages.

Definition of property 10

* * *

2 a : something owned or possessed specifically : a piece of

real estate b : the exclusive right to possess, enjoy, and dispose

of a thing : ownership

c : something to which a person or business has a legal title

After considering the ordinary definitions of the undefined

words in the Policy, the Court finds that the Plaintiffs have
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shown that their business operations were suspended by direct

physical loss of or damage to property at the premises.

Plaintiffs have also shown, applying a plain reading of the

definition of “period of restoration,” that the period ended or

will end on the dates the states’ restrictions are lifted because

that will constitute the “date when the location where the loss

or damage occurred could have been physically capable of

resuming the level of ‘operations’ which existed prior to the

loss or damage.” ECF Doc. 12-1 at 94. Plaintiffs are now

permitted, in some capacity, to operate their restaurants in

Ohio, Indiana, Michigan, Pennsylvania, and Florida with inperson dining. ECF Doc. 15-1 at ¶7.

Finally, Plaintiffs have shown that the loss or damage was

caused by a “covered cause of loss.” The Policy defines

“covered cause of loss” as a “fortuitous cause or event,

not otherwise excluded, which actually occurs during this

policy period.” Webster's dictionary defines “fortuitous” as

“occurring by chance.” 11 Plaintiffs have shown that the state

orders leading to the restaurants’ closings were caused by

a fortuitous event. As argued by Plaintiffs, no one could

have anticipated that state governments would issue orders

shutting down or greatly restricting Plaintiffs’ restaurants

– this was an “occurrence of chance.” Because Zurich's

Policy is susceptible of more than one interpretation and

because Plaintiffs have shown that they incurred “loss of

‘business income’ due to the necessary ‘suspension’ of their

‘operations’ during the ‘period of restoration’ ” “caused by

direct physical loss of or damage to property at a ‘premises,’”

they are entitled to summary judgment on the issue of

coverage under the Policy.

D. Exclusions

1. Microorganism Exclusion

*14 Zurich argues that the Policy's Microorganism

exclusion applies to exclude coverage in this case. The

Policy's Microorganism exclusion states:

12. Microorganisms

We will not pay for loss or damage consisting of, directly

or indirectly caused by, contributed to, or aggravated by the

presence, growth, proliferation, spread, or any activity of

“microorganisms”, unless resulting from fire or lightning.

Such loss or damage is excluded regardless or any other

cause or event, including a “mistake” or “malfunction,”

or weather condition, that contributes concurrently or in any

sequence to the loss, even if such other cause or event would

otherwise be covered.

But if a result of one of the excluded causes of loss is a

“specified cause of loss”, other than fire or lightning, we

will pay that portion of the loss or damage which was solely

caused by that “specified cause of loss”.

We will also not pay for loss, cost, or expense arising out

of any request, demand, order, or statutory or regulatory

requirement that requires any insured or others to test for,

monitor, clean up, remove, treat, detoxify, or neutralize,

or in any way respond to, or assess the effects of

“microorganisms”.

ECF Doc. 12-1 at 106.

Plaintiffs argue that the Microorganism exclusion does not

apply because the loss of their properties was not “directly

or indirectly caused by, contributed to, or aggravated by the

presence, growth, proliferation, spread, or any activity of

“microorganisms.” In fact, the parties stipulated that “none

of Plaintiffs’ Insured Premises were closed as a result of the

known or confirmed presence of SARS-CoV-2 or COVID-19

at any of the Insured Premises.” ECF Doc. 12 at 7, ¶ 44.

Instead, Plaintiffs argue that the loss of their properties was

caused by the government closures and that those closures (in

the absence of any presence or outbreaks at their restaurants)

are not excluded by the Policy.

Zurich argues that COVID-19 “indirectly” caused Plaintiffs

to close their restaurants. But this is not entirely accurate.

There was “no known or presumed infected person(s) with

COVID-19 at any of the Insured Premises at any time from

March 15, 2020 to April 27, 2020.” ECF Doc. 12 at 7, ¶

47. Thus, it was clearly the government's orders that caused

the closures. Ironically, Zurich later argues in its motion for

summary judgment that the government orders “responded to

a public health crisis,” and were not related to any damage at

the Plaintiffs’ properties. ECF Doc. 14 at 16. This argument

seems to undermine the purpose of the Microorganism

exclusion which was plainly to exclude coverage for damage

caused by microorganisms at the Plaintiffs’ properties.

The insurer, being the one who selects the language in the

contract, must be specific in its use; an exclusion from

liability must be clear and exact in order to be given effect.

Lane v. Grange Mut. Cos.,45 Ohio St. 3d at 65, citing

American Financial Corp. v. Fireman's Fund Ins. Co., 15

Ohio St. 2d 171, 239 N.E. 2d 33 (1968). Here, Plaintiffs’

argument prevails because the Microorganism exclusion does
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not clearly exclude loss of property caused by a government

closure. Plaintiffs’ restaurants were not closed because there

was an outbreak of COVID-19 at their properties; they were

closed as a result of governmental orders. Because Zurich's

Microorganism exclusion did not identify the possibility that,

even absent “the presence, growth, proliferation, spread, or

any activity of “microorganisms” damaging the Plaintiffs’

properties, the Plaintiffs may be required to close their dine-in

restaurants due to government orders responding to a public

health crisis, the Microorganism Exclusion does not apply.

*15 Going forward, Zurich could undoubtedly include an

exclusion for government closures in its policies. But the

Policy that Plaintiffs purchased did not contain such an

exclusion. Thus, it would be contrary to Ohio's laws of

contract interpretation to apply the Microorganism Exclusion

to the unprecedented government closures that occurred in

2020, particularly when the parties have stipulated that their

premises were not closed as the result of known or confirmed

presence of COVID-19 at any of the premises. ECF Doc. 12 at

7, ¶ 47. This is the conclusion that must be reached under Ohio

law because the Policy's language did not clearly identify the

unusual and unforeseeable events that led to the closings of

Plaintiffs’ properties. Nor could Plaintiffs have been aware

of such an exclusion when they purchased a policy and paid

premiums to Zurich for coverage.

This interpretation is further supported by the fact that,

in 2006, when insurers sought approval from the Ohio

Department of Insurance for the Microorganisms exclusion,

they explained that, despite the broad language of the

exclusion, they were seeking to avoid coverage for “viral

and bacterial contamination” of properties. Zurich argues

that Ohio law has not recognized the doctrine of regulatory

estoppel. ECF Doc. 16 at 12. That may be. But, at the least, the

2006 representations to the Ohio Department of Insurers show

the insurers’ intent in adding the Microorganisms exclusion to

their policies. They were attempting to exclude coverage for

property damage caused by the contamination of viruses and

bacteria on the insureds’ premises, not the loss of business

income caused by a government closure. And here, the

Plaintiffs’ properties were not damaged by the contamination

of a virus or bacteria.

Zurich argues that the anti-concurrent causation language in

the Microorganism exclusion further supports its position.

Zurich cites the Microorganism exclusion's language stating

that “regardless of any other cause or event... that contributes

concurrently or in any sequence to the loss, even if such

other cause or event would otherwise be covered.” But this

argument is dependent on a finding that Microorganisms

caused, at least in part, damage to Plaintiffs’ property. Such

a finding would be contrary to the parties’ stipulation that

none of Plaintiffs’ restaurants “were closed as the result of the

known or confirmed presence of SARS-CoV-2 or COVID 19

at any of the Insured Premises.” ECF Doc. 12, ¶44. Similarly,

Boughan v. Nationwide Property & Cas. Co., No. 1-04-57,

2005-Ohio-244, 2005 Ohio App. LEXIS 179 at *10 (3rd

Dist.), the Ohio case cited by Zurich stating that “Ohio courts

look to the underlying cause of loss” is inapposite because the

Boughan decision was based on the recognized application

of the policy's exclusion to the insureds’ damages – settling

floors and rotting floorboards. The anti-concurrent language

of the exclusion does not apply herebecause it cannot be

said that one of the causes of loss was contamination of

COVID-19 on the Plaintiffs’ premises, a fact to which Zurich

has stipulated.

Under Ohio law, the Court must attempt to construe an

exclusion, not in conformity with “what the insurer now

says it intended the words to mean,” but “in conformity

with the intention of the parties as gathered from the

ordinary and commonly understood meaning of the language

employed.” Bluemile, Inc., Atlas Indus. Contrs, Ltd., Nos.

16AP-789, 16AP-791, ¶ 24, 2017-Ohio-9196, 102 N.E.3d

579 (10th Dist.). Here, we know that insurers included the

Microorganism exclusion in their polices to exclude coverage

for damage to properties caused by the contamination of

viruses or bacteria on the premises. And, the parties have

stipulated to the fact that COVID-19 did not contaminate the

Plaintiffs’ premises. ECF Doc. 12, ¶44. Thus, in conformance

with the parties’ intentions and Ohio's laws of contract

interpretation, the Court finds that the Microorganism

Exclusion does not exclude business income coverage in this

case.

2. Loss of Use Exclusion.

*16 In their motion for summary judgment, Plaintiffs

anticipated that Zurich would argue that that the “Loss of

Market or Delay” exclusion will exclude coverage in this

case. Zurich did not actually argue this exclusion in its motion,

but in subsequent filings it takes up this argument. See ECF

Doc. 16 at 14. The “Loss of Market or Delay” exclusion

provides:
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We will not pay for loss or damage

caused by or resulting from loss of

market, loss of use, or delay. This

exclusion applies even if one of these

excluded causes of loss was caused

by or resulted from a “mistake” or

“malfunction.”

ECF Doc. 12-1 at 106. Plaintiffs argue that this exclusion does

not apply because, if it did, it would void business income

coverage in its entirety. Plaintiff cites case law (later vacated

by agreement of the parties) finding a similar exclusion

inapplicable because it would have vitiated the policy's

business income coverage. Oregon Shakespeare Festival

Ass'n, v. Great Am. Ins. Co., Case No. 1:15 cv 1932-CL, 2016

U.S. Dist. LEXIS 74450 at *15 (D. Or. June 7, 2016).

Zurich argues that this provision would not bar coverage when

there is physical damage caused by a covered peril, such as

a fire, that closes a restaurant while it is being repaired. ECF

Doc. 16 at 14. But that is not at all clear from a plain reading of

the Loss of Market or Delay exclusion. In fact, this exclusion

could be argued to exclude coverage if an insured lost the

use of property. The Business Income Coverage provides

that Zurich will pay for “loss of business income” sustained

“due to the necessary suspension of operations caused by

direct physical loss of or damage to property”. Here, the

Loss of Use exclusion would vitiate the Loss of Business

Income coverage. Moreover, Zurich did not even argue that

this exclusion applied until after Plaintiffs argued that it didn't.

Because the Policy must be read in its entirety and disputed

terms interpreted in a manner calculated to give the agreement

its intended effect, the “Loss of Use” exclusion does not

exclude coverage under the Business Income coverage of the

Policy. See Karabin v. State Auto. Mut. Ins. Co., 10 Ohio St.

3d 163, 167, 462 N.E. 2d 403, 406 (1984), quoting German

Fire Ins. Co. v. Roost, 55 Ohio St. 581, paragraph one of

the syllabus (1897). Because the Policy provides coverage

and none of the exclusions apply, Plaintiffs are entitled to

summary judgment on the coverage issues alleged in Counts

I and III of their complaint.

E. Bad Faith

Count II of Plaintiffs’ complaint is a bad faith claim based

on Zurich's denial of coverage. It is well established that

an allegation of bad faith made against an insurer for its

handling a claim for coverage will survive only if the record

shows that there were no circumstances in the case which

could be viewed as creating a reasonable justification for that

carrier's actions. See Zoppo v. Homestead Ins. Co., 71 Ohio

St. 3d 552, 644 N.E.2d 397, paragraph one of the syllabus

(1994). Plaintiffs have requested additional time to conduct

discovery on the issue of bad faith. However, no amount of

discovery would change the fact that Zurich had a reasonable

justification for determining that there was no coverage under

its Policy.

Although this Court disagrees with the holding in Zurich's

supplemental authority, it does illustrate that Zurich had a

reasonable justification for denying coverage. Other courts

have agreed with the arguments asserted by Zurich and

found in favor of insurers. Zurich denied coverage based

on its own interpretation of the Policy. Because the Policy

was susceptible to more than one interpretation, it must be

construed in favor of Plaintiffs as this Court has done in

accordance with Ohio law. However, given the “growing

consensus of courts” that have rejected COVID-19 business

interruption claims, it cannot be said that Zurich did not

have a reasonable justification for denying coverage. Because

Zurich had a reasonable justification for denying coverage, it

is entitled to summary judgment on plaintiff's bad faith claim

as a matter of law. See Addington v. Allstate Ins. Co., 142 Ohio

App.3d 677, 681, 756 N.E.2d 750 (9th Dist. July 5, 2001)

(holding that, as a matter of law, Allstate had not acted in

bad faith by denying coverage at a time when the district had

rejected similar insurance claims.) No amount of discovery

would change the Court's ruling on this claim.

IV. Conclusion

*17 Based on the foregoing, the Court GRANTS, in

part and DENIES, in part, Plaintiffs’ (ECF Doc. 15) and

Defendant's (ECF Doc. 14) Motions for Summary Judgment.

The Court GRANTS summary judgment to Plaintiffs on the

insurance coverage issue alleged in Counts I and III of their

complaint and DENIES summary judgment on Plaintiffs’

bad faith claim in Count II. Conversely, the Court DENIES

summary judgment to Defendant Zurich on Counts I and III

of Plaintiffs’ complaint and GRANTS summary judgment on

Plaintiffs’ bad faith claims.

The Court's order on Counts II and III is final and appealable.

The Court's order on Plaintiffs’ Count I - breach of contract

claim is not final and appealable because damages have

not yet been determined. The Court and parties agreed to
HENDERSON ROAD RESTAURANT SYSTEMS, INC., dba Hyde..., Slip Copy (2021)

 © 2021 Thomson Reuters. No claim to original U.S. Government Works. 14

accelerate the legal issues in this litigation before conducting

discovery on damages. Because Count I involves a controlling

question of law as to which there is substantial ground for

difference of opinion and because an immediate appeal from

this order may materially advance the ultimate termination of

the litigation, I hereby certify the legal issue in Count I for

interlocutory appeal pursuant to 28 U.S.C.S. § 1292(b). This

will permit the immediate appeal of the Court's opinion. And

an immediate appeal of the legal issues in this case would

accelerate the final disposition of this case and, if affirmed,

provide the most expedient path to the economic relief sought

by Plaintiffs.

IT IS SO ORDERED.

/s/ Dan Aaron Polster ___

Dan Aaron Polster

United States District Judge

All Citations

Slip Copy, 2021 WL 168422

Footnotes

1 Plaintiffs are now permitted, in some capacity, to operate their restaurants in Ohio, Indiana, Michigan,

Pennsylvania, and Florida with in-person dining. ECF Doc. 15-1 at ¶7.

2 The Policy is located in ECF Doc. 12-1.

3 The statement of arguments identifies the main arguments in the parties’ filings, which speak for themselves.

The Court has only paraphrased the parties’ arguments and has not attempted to exhaustively restate them

herein. However, the Court has fully considered the thorough arguments asserted in the parties’ filings.

4 The Court applies “the law of the state's highest court.” Garden City Osteopathic Hosp. v. HBE Corp., 55

F.3d 1126, 1130 (6th Cir. 1995) (citing Erie R.R. v. Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188

(1938)). “If, however, the state's highest court has not decided the applicable law, then the federal court

must ascertain the state law from all relevant data.” Id. (internal quotation marks and citation omitted). “[A]n

intermediate appellate court's judgment that announces a rule of law is a datum for ascertaining state law

which is not to be disregarded by a federal court unless it is convinced by other persuasive data that the

highest court of the state would decide otherwise.” FL Aerospace v. Aetna Cas. & Sur. Co., 897 F.2d 214,

218-19 (6th Cir. 1990) (internal quotation marks and citation omitted).

5 It is unclear why the Mastellone court found that “physical loss to property” equated to “physical injury. Id.

at ¶ 60.

6 It is not necessary to evaluate whether the additional “Civil Authority” coverage provides coverage because

general coverage exists under the Business Income Coverage Form. ECF Doc. 12-1 at 168.

7 https://www.merriam-webster.com/dictionary/physical

8 https://www.merriam-webster.com/dictionary/loss

9 https://www.merriam-webster.com/dictionary/damage

10 https://www.merriam-webster.com/dictionary/property

11 https://www.merriam-webster.com/dictionary/fortuitous

End of Document © 2021 Thomson Reuters. No claim to original U.S. Government Works.