Chief of Staff LLC v. Hiscox Insurance Company Inc., 532 F.Supp.3d 598

Plaintiff Chief of Staff LLC (Connecticut hospitality support business) sues Hiscox for denying coverage of COVID-19 closure losses under a commercial property policy; suit filed as a putative class action.
Connecticut governor issued closure orders in March 2020 forcing Chief of Staff to cease operations.
Chief of Staff asserts coverage under three policy provisions: Business Income, Extra Expense, and Civil Authority.
Hiscox moved to dismiss under Fed. R. Civ. P. 12(b)(6), arguing the policy requires "direct physical loss of or damage to property" and that the alleged losses do not meet that requirement; the parties agree Connecticut law governs.
The court held the Business Income and Extra Expense provisions require a tangible physical alteration or deprivation of property and do not cover loss of use caused solely by government closure orders; the Civil Authority provision likewise did not apply because it requires physical damage to other property within one mile that prompted the civil-authority action.
The complaint was dismissed without prejudice with leave to amend (one opportunity to replead).

Issue	Plaintiff's Argument	Defendant's Argument	Held
Business Income coverage trigger	"Direct physical loss" includes loss of use; closures deprived plaintiff of use of premises so coverage applies	"Direct physical loss" requires tangible, concrete physical alteration or deprivation to property	Held: No coverage — language requires physical change; mere governmental prohibition of use insufficient
Extra Expense coverage trigger	Same as Business Income — kicks in with suspension caused by direct physical loss	Same as Business Income — requires physical loss/damage	Held: No coverage — falls with Business Income because provision uses the same physical-loss requirement
Civil Authority coverage	Closure orders cause physical loss analogously; neighboring properties were likewise affected so civil-authority coverage applies	Civil Authority requires "damage to property" elsewhere within one mile that caused the civil-authority action prohibiting access	Held: No coverage — complaint alleges no physical damage to other property or that orders were taken in response to such damage
Ambiguity / contra proferentem	Policy is ambiguous; construed for coverage in insured's favor	Policy unambiguous; "physical" limits meaning	Held: Not ambiguous under Connecticut law; contra proferentem not invoked

Galgano v. Metro. Prop. & Cas. Ins. Co., 838 A.2d 993 (Conn. 2004) (rules for construing insurance contracts)
Hanks v. Powder Ridge Rest. Corp., 885 A.2d 734 (Conn. 2005) (contractual intent as question of law when language definitive)
Karas v. Liberty Ins. Corp., 228 A.3d 1012 (Conn. 2019) (focus on parties' expectations in coverage interpretation)
R.T. Vanderbilt Co. v. Hartford Accident & Indem. Co., 216 A.3d 629 (Conn. 2019) (policy provisions construed as laymen would understand them)
Lexington Ins. Co. v. Lexington Healthcare Grp., Inc., 84 A.3d 1167 (Conn. 2014) (avoidance of surplusage in policy interpretation)
Conn. Ins. Guar. Ass'n v. Fontaine, 900 A.2d 18 (Conn. 2006) (contra proferentem doctrine in insurance disputes)
Erie Ins. Grp. v. Sear Corp., 102 F.3d 889 (7th Cir. 1996) (conflicting case law does not alone create ambiguity)
TMW Enters. v. Fed. Ins. Co., 619 F.3d 574 (6th Cir. 2010) (disagreement among judges does not establish ambiguity)
Dickie Brennan & Co. v. Lexington Ins. Co., 636 F.3d 683 (5th Cir. 2011) (civil-authority coverage applies where order issued as direct result of physical damage nearby)
United Am. Ins. Co. v. Wilbracht, 825 F.2d 1196 (7th Cir. 1987) (differently worded policy provisions are presumed to have different meanings)
Runnion ex rel. Runnion v. Girl Scouts of Greater Chi. & Nw. Ind., 786 F.3d 510 (7th Cir. 2015) (leave to amend ordinarily granted after 12(b)(6) dismissal)