Santo's Italian Cafe LLC v. Acuity Ins. Co., 15f4th398

Santo’s Italian Café (Medina, OH) suspended in‑person dining after Ohio COVID‑19 emergency and health‑director orders; takeout remained allowed.
The café filed an insurance claim under its commercial property policy for Business Income and Extra Expense coverage after Acuity denied the claim; insurer moved to dismiss and removal to federal court followed.
Policy covers lost business income only if the suspension was “caused by direct physical loss of or damage to” covered property; “suspension” and “period of restoration” are defined and tied to physical repair/replace remedies.
The parties agreed the shutdown caused the suspension and lost income; dispute centered on whether a pandemic or governmental closure constitutes a “direct physical loss of or damage to” property.
The district court dismissed; the Sixth Circuit affirmed, holding no covered physical loss or damage occurred and therefore coverage was not triggered. The court did not need to resolve two potential exclusions (virus; ordinance or law) but discussed them.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether COVID‑19 pandemic or Ohio shutdown order constitutes a "direct physical loss of or damage to" property triggering business‑income coverage	Loss of use/deprivation of intended use = "physical loss"; closure made premises unsafe/unfit for dine‑in	"Direct physical loss or damage" requires tangible/physical alteration or destruction of property; loss of use alone is not enough	No — shutdown/virus did not cause direct physical loss or damage; coverage not triggered
Whether phrase "direct physical loss" is ambiguous or rendered surplusage (thus construing for insured)	Separate phrasing (loss vs. damage) and economic deprivation create ambiguity; interpret in favor of insured	Contract language has ordinary meaning in insurance context; surplusage canon does not create ambiguity here	No ambiguity found; terms construed to require physical/tangible loss
Whether policy exclusions (virus; ordinance or law) bar coverage regardless of trigger	Exclusions inapplicable or ambiguous	Virus exclusion likely applies; "ordinance or law" exclusion plausibly covers regulatory use restrictions	Court did not rely on exclusions because coverage never triggered; noted virus exclusion broad and ordinance/law likely applies but left some questions open

Oral Surgeons, P.C. v. Cincinnati Ins. Co., 2 F.4th 1141 (8th Cir. 2021) (holding gubernatorial order prohibiting non‑emergency procedures did not cause direct physical loss to property)
Mastellone v. Lightning Rod Mut. Ins. Co., 884 N.E.2d 1130 (Ohio Ct. App. 2008) (mold stains did not constitute physical loss when siding could be cleaned and structural integrity unaffected)
Port Auth. of N.Y. & N.J. v. Affiliated FM Ins. Co., 311 F.3d 226 (3d Cir. 2002) (in narrow circumstances total loss of use can amount to physical loss)
Motorists Mut. Ins. Co. v. Hardinger, [citation="131 F. App'x 823"] (3d Cir. 2005) (loss‑of‑use analysis recognizing extreme facts may support physical‑loss finding)
Universal Image Prods., Inc. v. Fed. Ins. Co., [citation="475 F. App'x 569"] (6th Cir. 2012) (contract interpretation principles applied to similar policy language)
Retail Ventures, Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, 691 F.3d 821 (6th Cir. 2012) (clarified when phrasing can render contract ambiguous; not determinative here)
TMW Enters., Inc. v. Fed. Ins. Co., 619 F.3d 574 (6th Cir. 2010) (surplusage alone does not make an insurance policy ambiguous)