Opinion:Cherokee Nation v. Lexington Insurance Co., 2022 OK 71
Subject matter:Insurance
Date Decided:September 13, 2022
Trial Court:District Court of Cherokee County; Judge D. Kirkley
Route to this Court:Appeal of summary judgment; Retained on own motion by OKSCT
Facts:The Cherokee Nation voluntarily and temporarily closed its properties in March 2020 due to the threat of COVID-19. The properties were re-opened in June 2020 and the Nation made a claim for business interruption under its all-risk property insurance policy. The insurer denied the claim on the basis that business interruption only occurs during the restoration period that consists of the rebuilding, repairing, or replacing of an insured’s damaged or lost property. The insurer urged that the Nation did not suffer any direct physical loss or damage to its property that required any rebuilding, repairing, or replacing. 
The trial court granted the Nation’s motion for partial summary judgment, finding coverage for the Nation’s losses under its policy’s business interruption provision. The insurer appealed. 
Standard of Review:De novo review of grant of summary judgment. In addition, the interpretation of an insurance policy is a question of law, also reviewed de novo
Analysis:The question before the Court is whether the district court correctly determined that business interruption coverage for losses “caused by direct physical loss or damage…to real and/or personal property” includes losses incurred by some intangible harm that rendered the Nation’s property unusable for its intended purpose.
The foremost principle in Oklahoma law governing insurance coverage disputes is that an insurance policy is a contract and the insured and insurer are free to contract for insurance coverage for such risks as they see fit, and the parties are bound by the terms of their agreement. The Court will not undertake to rewrite the terms of a policy.
An “all-risk” policy does not extend coverage to every conceivable loss. The policy provides coverage, “against loss resulting directly from interruption of business, services or rental value created by direct physical loss or damage…to real and/or personal property…” The policy does not define “direct physical loss or damage” but this alone does not make these terms ambiguous. Under the plain language and common usage of the terms the phrase does not include coverage for merely loss of use of the property. Instead, the phrase requires immediate and actual, material, or tangible deprivation or destruction of property. 
This decision is in line with nearly all circuit courts of appeals, many federal district courts, and state courts that have all ruled that business interruption coverage requires actual, tangible loss or damage to the property, not just loss of use. 
Outcome:Reversed and Remanded
Vote:6-3; Concur: Darby, C.J, Kane, V.C.J., Winchester (author), Rowe, Kuehn, JJ., and Prince, S.J. Dissent: Edmondson (separate writing), Combs, and Gurich, JJ.
Other: The policy at issue did not contain the common language utilized by carriers to clearly exclude losses due to pandemics or suspected, imminent, threatened, or fear of viruses. However, the Dissent notes that the day after suit was filed in this case the insurer added an exclusion to the policy to bar any claim based on imminent health hazards.