Abstract: On December 27, 2022, the Ohio Supreme Court unanimously ruled that a business owner’s property insurance policy issued by Owners Insurance Co. to EMOI Services, LLC did not afford coverage for losses sustained in a ransomware attack because computer software is “entirely intangible” and “cannot experience ‘direct physical loss or physical damage.’” EMOI Servs., LLC. v. Owners Ins. Co., 2022-Ohio-4649 (Ohio 2022). In doing so, the court reversed an attention-getting split decision by the lower appellate court. This article takes an in-depth look at the case and discusses its significant implications.

The Ohio Supreme Court’s decision was based on its commonsense conclusions that software (as intangible property) cannot suffer physical damage, and that coverage for restoration of information under the Electronic Equipment Endorsement could not be triggered absent the threshold requirement of “direct physical loss or damage” to the media on which the information was stored. Although claims involving cyber events may be relatively new, this decision is an important reminder that long-standing, fundamental principles of insurance policy construction and law are applicable to cyber claims.