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Law360 (February 26, 2021, 9:25 p.m. EST) – An Ohio federal judge on Friday launched a COVID-19 lawsuit from a property management company, freeing Westfield Insurance Co. from having to pay for losses assumed by the insured and considering that the policy does not cover the economic losses linked to the pandemic.
U.S. District Judge Pamela A. Barker said Equity Planning Corp. did not allege that its properties suffered any direct physical loss or damage, a prerequisite for coverage. The police unequivocally rule out virus-related losses and do not cover the company’s financial losses caused by government shutdown orders issued to curb the spread of COVID-19, the judge said.
“The plain and ordinary meaning of the term ‘direct physical loss’ does not apply to the economic losses related to COVID-19 alleged by EP in its complaint,” Justice Barker said. “EP does not allege that any physical force acted upon, altered or otherwise tangibly affected its property in any way.”
The commercial property management company filed a draft class action lawsuit against Westfield in April after the insurer refused to pay the company’s COVID-19 losses, alleging it suffered loss of use of properties when its tenants stopped paying rent after being forced to close businesses last March.
The company argued that its economic losses must be covered by the policy because it has been deprived of the use of its property for a period of time. However, on Friday, Justice Barker said Equity never completely lost the use and possession of its properties, and that government shutdown orders had not cut off its access to insured properties.
“EP’s interpretation that ‘direct physical losses’ include economic losses … extends political language beyond its ordinary meaning,” she said in the order.
While “loss” can be defined as “deprivation” as Equity proposed, policy requires the loss to be “direct” and “physical,” the judge said. “EP did not allege that it was physically deprived of its commercial property in any way. EP had – and still does – its physical property. “
The interpretation that “the direct physical loss or damage suffered by” requires tangible and demonstrable change is supported by compelling case law on appeal from Ohio, Justice Barker added.
Counsel for the parties could not immediately be 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 United States District Court for the Northern District of Ohio.
–Edited by Janice Carter Brown.
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