513 F.Supp.3d 724
N.D. Tex.2021Background
- Plaintiff Christie Jo Berkseth-Rojas, a Minnesota dentist, purchased an all-risk commercial property policy from Aspen covering Dec 6, 2019–Dec 6, 2020.
- Minnesota COVID-19 executive orders and the pandemic led plaintiff to reduce/close operations, incur extra expenses (e.g., plexiglass shield), and notify Aspen of a claim on March 27, 2020; Aspen denied coverage the same day.
- Plaintiff sued for breach of contract and declaratory relief, invoking Practice Income, Extra Expense, Civil Authority, and Sue and Labor provisions of the policy.
- Aspen moved to dismiss under Fed. R. Civ. P. 12(b)(6); parties agreed Minnesota law governs policy interpretation.
- Central legal question: whether plaintiff plausibly alleged ‘direct physical loss or damage’ to insured property (or to other property for Civil Authority) sufficient to trigger coverage.
- Court held plaintiff failed to allege actual physical contamination or tangible alteration by COVID-19 (allegations described loss of use/function rather than contamination), dismissed claims, and granted leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether COVID-19 presence or Orders caused 'direct physical loss or damage' triggering Practice Income and Extra Expense coverage | Berkseth-Rojas: presence or threat of virus rendered premises unsafe, diminished functionality, and required repairs, which constitutes direct physical loss or damage | Aspen: policy requires tangible physical alteration/contamination; loss of use/function or government-ordered closures do not suffice | Court: Plaintiff pleaded only loss of use/function and not actual contamination; insufficient to show direct physical loss or damage; claim dismissed (with leave to amend) |
| Whether Civil Authority coverage is triggered by Orders prohibiting access due to COVID-19 | Plaintiff: Orders prohibited access because of dangerous physical conditions from COVID-19, so Civil Authority coverage applies | Aspen: Civil Authority requires direct physical damage to other property; Orders without underlying physical contamination do not trigger coverage | Court: Same defect — no plausible allegation of physical contamination of other property; Civil Authority claim dismissed |
| Whether Sue and Labor provision was triggered | Plaintiff: steps to protect property (temporary repairs, shielding) implicate Sue and Labor obligations/coverage | Aspen: provision applies only if there is damaged property or further damage to protect | Held: Plaintiff did not allege any damaged property or further damage to trigger the provision; claim dismissed |
| Declaratory judgment claims duplicative or independently viable | Plaintiff: seeks declarations that the policy covers COVID-19 losses under the same provisions | Aspen: declaratory relief is duplicative of contract claims | Court: Declaratory claims dismissed as they duplicate breach-of-contract claims (and because substantive coverage pleading failed) |
Key Cases Cited
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (plausibility pleading standard for Rule 12(b)(6))
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading must state plausible claim, not mere possibility)
- Pentair, Inc. v. American Guarantee & Liability Ins. Co., 400 F.3d 613 (8th Cir.) (mere loss of use does not establish direct physical loss)
- Source Food Tech., Inc. v. U.S. Fidelity & Guaranty Co., 465 F.3d 834 (8th Cir.) (actual physical contamination required for coverage)
- Netherlands Ins. Co. v. Main St. Ingredients, LLC, 745 F.3d 909 (8th Cir.) (recognizing contamination by pathogens as physical loss)
- General Mills, Inc. v. Gold Medal Ins. Co., 622 N.W.2d 147 (Minn. Ct. App.) (noting property can be ‘injured in some way’ without structural harm)
- Sentinel Management Co. v. New Hampshire Ins. Co., 563 N.W.2d 296 (Minn. Ct. App.) (contamination/infestation can constitute physical damage)