Jesse's Embers, LLC d/b/a Jesse's Embers v. Western Agricultural Insurance Company d/b/a Farm Bureau Financial Services, 973 N.W.2d 507

Jesse’s Embers operated a bar/restaurant in Des Moines and closed in March 2020 in compliance with the Governor’s COVID-19 proclamation, later partially reopening in May 2020.
It submitted a claim under its Business Owners Policy for Business Income, Extra Expense, and Civil Authority losses caused by the forced suspension.
The policy covered loss caused by “direct physical loss of or damage to” covered property and defined Covered Cause of Loss as “Direct physical loss,” but included a Virus or Bacteria exclusion.
Farm Bureau denied the claim, citing the policy’s physical-loss requirement and the virus exclusion; Jesse’s Embers sued for breach of contract and bad-faith denial.
The district court granted summary judgment for Farm Bureau; Jesse’s Embers appealed to the Iowa Supreme Court.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether “direct physical loss of or damage to” covers mere loss of use from governmental closure	Loss of use from the Governor’s order triggers Business Income/Extra Expense coverage	The phrase requires a physical aspect or contamination; mere loss of use is insufficient	The phrase requires a physical aspect; plaintiff alleged no contamination, so no coverage
Whether Civil Authority coverage applies when a proclamation prohibited access	Governor’s order prohibiting access to the area triggers Civil Authority coverage	Civil Authority requires damage to nearby property causing dangerous physical conditions; proclamation was preventative	No—plaintiff alleged no damage to neighboring property and the proclamation responded to transmission risk, so Civil Authority does not apply
Whether the Virus exclusion bars coverage	Plaintiff argued exclusion should not bar recovery (e.g., no contamination alleged)	Insurer argued virus exclusion applies to losses from viruses	Court did not reach the exclusion because it found no coverage under the policy provisions
Whether the reasonable expectations doctrine expands coverage	Plaintiff claims agent failed to explain limits and expected income-loss coverage for shutdowns	Insurer points to lack of evidence of agent representations or reliance	Doctrine does not apply; plaintiff offered no evidence that fostered coverage expectations, so summary judgment proper

Am. Guar. & Liab. Ins. v. Chandler Mfg. Co., 467 N.W.2d 226 (Iowa 1991) (policyholder bears initial burden to establish coverage)
Boelman v. Grinnell Mut. Reins., 826 N.W.2d 494 (Iowa 2013) (limits on applying the reasonable expectations doctrine)
Clark–Peterson Co. v. Indep. Ins. Assocs., 492 N.W.2d 675 (Iowa 1992) (framework for reasonable expectations analysis)
Nationwide Agri–Bus. Ins. v. Goodwin, 782 N.W.2d 465 (Iowa 2010) (reasonable-expectations standards)
Q Clothier New Orleans, L.L.C. v. Twin City Fire Ins., 29 F.4th 252 (5th Cir. 2022) (civil-authority orders issued to mitigate COVID-19 do not substitute for physical damage to nearby property)
10012 Holdings, Inc. v. Sentinel Ins., 21 F.4th 216 (2d Cir. 2021) (civil-authority coverage requires risk of physical loss to nearby property)
Mudpie, Inc. v. Travelers Cas. Ins. of Am., 487 F. Supp. 3d 834 (N.D. Cal. 2020) (stay-at-home orders were preventative; no adjacent property damage alleged)
Newchops Rest. Comcast LLC v. Admiral Indem. Co., 507 F. Supp. 3d 616 (E.D. Pa. 2020) (physical or structural damage required for civil-authority or business-income coverage)
United Airlines, Inc. v. Ins. of the State of Pa., 385 F. Supp. 2d 343 (S.D.N.Y. 2005) (civil-authority coverage requires physical damage, not merely economic loss)