U.S. District Judge Pamela A. Barker said Equity Planning Corp. failed to allege its properties sustained a direct physical loss or damage, a precondition for coverage. The policy unambiguously excludes virus-related losses and does not cover the company's financial losses caused by government closure orders issued to curb the spread of COVID-19, the judge said.
"The plain, ordinary meaning of the term 'direct physical loss' does not apply to the COVID-19-related economic losses that E.P. alleges in its complaint," Judge Barker said. "E.P. does not allege that any physical force acted upon, altered, or otherwise tangibly affected its property in any way."
The commercial real estate management company brought a proposed class action complaint against Westfield in April after the insurer refused to pay for the company's COVID-19-related losses, alleging it suffered a loss of use of properties when its tenants stopped paying rent after they were forced to shut down businesses last March.
The company has maintained that its economic losses must be covered under the policy because it was deprived of using its property for a period of time. However, on Friday, Judge Barker said Equity never fully lost use and possession of its properties, and the government closure orders did not cut its access to the insured properties.
"E.P.'s interpretation that 'direct physical loss' includes economic losses … stretches the policy language beyond its plain meaning," she said in the order.
While "loss" can be defined as a "deprivation" as the Equity proposed, the policy requires that the loss be "direct" and "physical," the judge said. "E.P. has not alleged that it was physically deprived of its business property in any way. E.P. possessed — and still possesses — its physical property. "
The interpretation that "direct physical loss of or damage to" requires tangible, demonstrable alteration is supported by persuasive Ohio appellate case law, Judge Barker added.
Counsel for the parties could not be immediately reached for comment on Friday.
Equity is represented by Thomas J. Connick of Connick Law.
Westfield is represented by John J. Haggerty of Fox Rothschild LLP.
The case is Equity Planning Corporation v. Westfield Insurance Company, case number 1:20-CV-01204, in the U.S. District Court for the Northern District of Ohio.
--Editing by Janice Carter Brown.
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