35 F.4th 1318
11th Cir.2022Background:
- Henry’s Louisiana Grill closed dine‑in service after Georgia’s March 2020 COVID‑19 emergency declaration and filed an insurance claim for lost business income.
- Policy covered losses from "direct physical loss of or damage to" covered property and included Business Income and Civil Authority provisions; a Virus/Bacteria exclusion was also in the policy.
- Allied Insurance denied the claim, stating no direct physical loss or damage occurred and citing the virus exclusion.
- Henry’s sued; the district court dismissed for failure to state a claim, finding no physical change to the restaurant and no restricted access to the area.
- On appeal, the Eleventh Circuit (applying Georgia law) framed the dispositive question as whether COVID‑19 presence or the related closure constitutes a "direct physical loss of or damage to" property.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether COVID‑19 presence or the governor’s closure constitutes a "direct physical loss of or damage to" the insured property (Business Income) | Henry’s: loss of use of dining room is a physical loss; it was "deprived of" a physical space | Allied: policy requires tangible, physical alteration or damage; loss of use/intangible harm is not covered | Court: No — Georgia law requires an actual, tangible change; loss of use from COVID‑19 is intangible and not a physical loss |
| Whether Civil Authority coverage is triggered by alleged contamination of nearby property | Henry’s: governor’s order responded to COVID contamination of nearby properties, satisfying requirement of damage to nearby property | Allied: same requirement of direct physical loss applies to nearby property; mere presence of virus does not show physical alteration | Court: No — plaintiff did not allege actual physical change to nearby properties, so Civil Authority not triggered |
Key Cases Cited
- AFLAC Inc. v. Chubb & Son, Inc., 260 Ga. App. 306 (interpreting "direct physical loss" to require actual, tangible change to property)
- SA Palm Beach, LLC v. Certain Underwriters at Lloyd’s London, 32 F.4th 1347 (Eleventh Circuit 2022) (COVID cases require tangible alteration; intangible loss of use insufficient)
- McMahan v. Toto, 311 F.3d 1077 (Eleventh Circuit 2002) (follow state intermediate appellate decisions absent state supreme court authority)
- Reed v. Auto‑Owners Ins. Co., 284 Ga. 286 (Georgia 2008) (contract interpretation begins with the policy text)
- Assurance Co. of Am. v. BBB Serv. Co., 265 Ga. App. 35 (Georgia Ct. App. 2003) (Civil Authority coverage depends on direct physical loss to other property)
- Nat’l Cas. Co. v. Ga. Sch. Bds. Ass’n‑Risk Mgmt. Fund, 304 Ga. 224 (Georgia 2018) (policy must be read as a whole when construing terms)