Equity Planning Corporation v. Westfield Insurance Company, 522 F.Supp.3d 308

Background

Plaintiff Equity Planning Corporation (E.P.), a commercial real-estate manager, alleged lost business income after tenants suspended operations during Ohio’s March 23, 2020 Stay At Home Order and could not pay rent.
E.P. was insured under Westfield policy TRA 0-343-47M, which included Business Income & Extra Expense coverage and Civil Authority coverage; policy required a "direct physical loss of or damage to" covered property to trigger business-income benefits.
The policy also contained an Exclusion of Loss Due to Virus or Bacteria that barred coverage for loss or damage "caused by or resulting from any virus...capable of inducing physical distress, illness or disease."
E.P. alleged probable presence of SARS‑CoV‑2 in the vicinity but did not allege the virus was actually detected on its premises; Westfield acknowledged then denied the claim and moved to dismiss.
The Court applied Ohio law, concluded E.P. failed to plead the required “direct physical loss of or damage to” (i.e., tangible, material alteration/structural harm), found the Virus Exclusion unambiguously barred coverage, dismissed all claims, and denied the class-motion as moot.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Business Income/Extra Expense coverage is triggered by COVID-19 closures (meaning of "direct physical loss of or damage to")	"Direct physical loss" can include loss of use or material deprivation from probable virus presence; language ambiguous and should be construed for insured	Requires tangible, material, perceptible physical harm/structural alteration; economic loss or mere loss of use not covered	Held: No. Policy unambiguously requires tangible/material physical loss or damage; E.P. failed to plead such harm, so coverage not triggered
Whether Civil Authority coverage applies for the Stay At Home Order	Closure orders responding to pandemic constitute civil-authority actions resulting from physical conditions and deprive use, so coverage applies	Civil Authority requires damage to other property within area and action in response to dangerous physical conditions at or near that property; Ohio order was preventative and did not block access as required	Held: No. E.P. did not allege damage to nearby property within one mile or that civil authority prohibited access as the clause requires
Whether the Virus Exclusion bars coverage for pandemic-related losses	Exclusion ambiguous; government orders (not virus alone) caused losses; no anti-concurrent-causation clause so exclusion should not preclude coverage for shutdowns	Exclusion plainly bars loss caused by or resulting from any virus or microorganism capable of inducing illness, which includes COVID‑19 and pandemic-related losses	Held: Yes. Exclusion unambiguously precludes coverage for losses caused by or resulting from viruses, including COVID‑19
Whether E.P. stated a claim for breach of covenant of good faith and fair dealing (bad faith)	Denial was unjustified given plaintiff's reading of coverage	Denial reasonable because no coverage under the policy	Held: Dismissed. Denial was reasonable where coverage was not owed, so bad-faith claim fails

Key Cases Cited

Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (pleading standard for plausibility)
Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (pleading must state a plausible claim)
Mastellone v. Lightning Rod Mut. Ins. Co., 175 Ohio App. 3d 23 (Ohio Ct. App. 2008) ("physical injury" requires tangible harm affecting structural integrity)
Universal Image Prods., Inc. v. Federal Ins. Co., [citation="475 F. App'x 569"] (6th Cir. 2012) (economic losses without tangible property damage do not trigger coverage)
Westfield Ins. Co. v. Galatis, 797 N.E.2d 1256 (Ohio 2003) (policy interpretation principles; give words their ordinary meaning)
Bailey v. V & O Press Co., 770 F.2d 601 (6th Cir. 1985) (framework for predicting state-law rulings when highest court is silent)