First Watch Restaurants, Inc. v. Zurich American Insurance Company, 519 F.Supp.3d 1056

First Watch Restaurants, a multi-state breakfast/brunch chain, suspended on-site dining in 2020 in response to COVID-19 executive orders and alleged resulting business-income losses and extra expenses.
First Watch submitted claims under its Zurich American policy (March 1, 2020–March 1, 2021), invoking Section IV (Time Element) and Section V (Special/Civil Authority) coverages.
Both coverages require that the suspension result from a "direct physical loss of or damage to" property; the policy also contains a contamination exclusion.
Zurich denied coverage, arguing COVID-19 did not cause direct physical loss or damage and that contamination exclusions apply; First Watch sued for declaratory relief and breach of contract.
The court applied Florida law, found Eleventh Circuit precedent controlling, and concluded First Watch pleaded only economic losses (not physical loss), granting Zurich’s Rule 12(b)(6) motion and dismissing with prejudice.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether loss of the ability to operate due to COVID-19 orders satisfies the policy requirement of "direct physical loss of or damage to property" (Section IV)	Policy language is ambiguous; inability to operate is a direct physical loss and should trigger coverage	Policy unambiguously requires physical damage or loss to property; COVID-19 economic harm is not physical loss and no facts allege virus contamination at insured locations	Court held economic losses are not "direct physical loss or damage;" no coverage under Section IV; claim dismissed
Whether civil-authority/special coverages are triggered when government orders restricted on-site dining (Section V)	Orders were responses to COVID-19 and thus triggered civil-authority coverage	The provision requires the order be in response to physical loss/damage to nearby property and must prohibit access; orders did not allege physical property damage and allowed takeout/delivery	Court held orders were not shown to respond to physical loss and did not prohibit access; no coverage under Section V; claim dismissed
Whether dismissal should be without prejudice or allow amendment	Plaintiff sought to plead facts to establish coverage	Defendant argued amendment would be futile given the pleadings and controlling precedent	Court found amendment would be futile and dismissed the case with prejudice

Mama Jo's, Inc. v. Sparta Ins. Co., [citation="823 F. App'x 868"] (11th Cir. 2020) (declining to treat COVID-19–related business downturn as physical loss)
Interline Brands, Inc. v. Chartis Specialty Ins. Co., 749 F.3d 962 (11th Cir. 2014) (ambiguity resolved for coverage only when policy is susceptible to two reasonable readings)
Swire Pac. Holdings, Inc. v. Zurich Ins. Co., 845 So. 2d 161 (Fla. 2003) (plain and unambiguous policy language controls under Florida law)
Taurus Holdings, Inc. v. U.S. Fid. & Guar. Co., 913 So. 2d 528 (Fla. 2005) (ambiguities in insurance policies are construed in favor of the insured)
Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading standard requires factual allegations raising a plausible right to relief)
Corsello v. Lincare, Inc., 428 F.3d 1008 (11th Cir. 2005) (amendment may be denied as futile when claim cannot succeed)