EMOI Services, L.L.C. v. Owners Insurance Company

Summary

The Supreme Court of Ohio held that a businessowners insurance policy requiring direct physical loss of or damage to covered media did not cover losses from a ransomware attack. Because computer software is intangible and the attack caused no physical damage to the hardware or media containing the software, the electronic-equipment endorsement did not apply. The court reversed the Second District Court of Appeals and reinstated summary judgment for Owners Insurance Company.

Holdings

1. The endorsement requires direct physical loss of or direct physical damage to covered media caused by a covered cause of loss. Computer software, as an intangible item, cannot itself experience direct physical loss or physical damage, and the policy does not provide coverage absent physical damage to the media containing the software.
2. Owners did not breach its insurance contract with EMOI because the policy did not cover the type of loss caused by the ransomware attack.
3. The court reinstated summary judgment for Owners on EMOI's claim for bad-faith denial of insurance coverage because the policy did not provide coverage for EMOI's loss.

Questions Presented

1. Whether the businessowners policy's electronic-equipment endorsement covers losses from a ransomware attack when the attack caused no direct physical loss of or physical damage to covered media or hardware.
2. Whether Owners breached the insurance contract by denying EMOI's claim.
3. Whether EMOI's bad-faith claim could proceed despite the absence of coverage.

Disposition

reversed