Florida Judges Find COVID-19 Does Not Cause Direct Physical Loss or Damage

The tidal wave of favorable rulings for insurers in COVID-19 business interruption insurance coverage lawsuits that started in 2020 is continuing in 2021. As this blog has previously explained, commercial property insurance policies generally require “direct physical loss of or damage to” the insured property to trigger business interruption coverage. In some COVID-19 business interruption insurance lawsuits, policyholders have alleged that the presence of COVID-19 on insured property has caused such “direct physical loss of or damage to” the property. However, in the first two weeks of 2021 alone, three judges in the U.S. District Court for the Southern District of Florida dismissed lawsuits with such allegations and held that COVID-19 does not cause “direct physical loss of or damage to” property, as needed to trigger business interruption coverage.

Mena Catering, Inc. v. Scottsdale Insurance Co.

In Mena Catering, the plaintiff-policyholder (a catering business) sought coverage under a commercial property insurance policy for financial losses allegedly sustained due to business interruption resulting from COVID-19. Specifically, the plaintiff alleged that COVID-19 had been present at the insured premises, “render[ing] the premises contaminated, unsafe and unfit for its intended use and therefore caus[ing] physical property damage or loss.” The plaintiff further alleged that the “presence of coronavirus has caused a distinct alteration of the Insured Property which cannot be repaired through a one-time disinfection, and thus has some permanency.”

Judge Beth Bloom found these allegations insufficient to state a claim for coverage and granted the insurer’s motion to dismiss with prejudice, explaining:

[A]lthough the Complaint alleges (with much speculation) that COVID-19 is present on Plaintiff’s properties and has somehow caused an undescribed “distinct alteration” to the premises, even accepting those allegations, the Complaint still fails to allege a “direct physical loss of or damage to Covered Property ... caused by or resulting from any Covered Cause of Loss.” There is no “direct physical loss” where the alleged harm consists of the mere presence of the virus on the physical structure of the premises.

Carrot Love, LLC v. Aspen Specialty Insurance Co.

In Carrot Love, the plaintiff-policyholder (an owner/operator of three restaurants) alleged that, “beginning at least in February 2020, COVID-19 deposited on ‘various surfaces such as countertops, tables and chairs’ at the Plaintiff’s three restaurant locations.” The plaintiff claimed that the “‘presence of any COVID-19 particles on physical property such as countertops, tables and chairs, impair[ed their] value, usefulness, and/or normal function’ causing the Plaintiff to suffer a ‘direct[] physical loss or damage.’”

Judge Robert N. Scola Jr. found that these allegations failed to state a claim for coverage under the policy’s business income coverage provision, which required “direct physical loss of or damage to” the insured property to trigger coverage. Accordingly, Judge Scola granted the insurer’s motion to dismiss, explaining:

As other Courts in this district have noted when considering similar lawsuits, the Plaintiff here simply does not provide the Court with adequate reason to depart from the nearly unanimous view that COVID-19 does not cause direct physical loss or damage to a property sufficient to trigger coverage under the policy at issue here.

Island Hotel Properties, Inc. v. Fireman’s Fund Insurance Co.

In Island Hotel Properties, the plaintiff-policyholder (an owner of hotels, residential units, and an office owned by the plaintiff) sought business interruption coverage under a commercial property insurance policy that only provided coverage if there was “direct physical loss or damage to” one of the insured properties. The plaintiff alleged that COVID-19 was “present” at the insured properties on a particular date, but Chief Judge K. Michael Moore held that this allegation was insufficient to state a claim for coverage and granted the insurer’s motion to dismiss with prejudice.