32 F.4th 656
8th Cir.2022Background:
- Monday Restaurants (operator of two St. Louis restaurants) and a pediatric dental practice curtailed operations in March–May 2020 under COVID-19 guidance; restaurants offered limited pickup/drive-through/delivery; dental practice treated emergencies only.
- Both businesses purchased additional PPE and equipment (masks, gloves, air filters, plexiglass, disinfectants) and filed claims for business-income loss and extra expenses under their commercial policies.
- Insurers denied coverage; each business sued its insurer (putative class actions); policies at issue were identical and affiliated insurers moved to dismiss under Rule 12(b)(6).
- The district court granted the insurers’ motions to dismiss; plaintiffs appealed to the Eighth Circuit.
- The Eighth Circuit applied Missouri contract law and the Twombly/Iqbal pleading standard, focusing on whether plaintiffs alleged a "direct physical loss of or damage to property." The court affirmed dismissal.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether government-ordered closures and pandemic effects constitute a "direct physical loss of or damage to property" under the policy | Closures and loss of use equal "loss of" property even without observed virus on premises | Policy requires a physical loss or physical alteration; pandemic-related restrictions do not show physical loss/damage | Held: No — plaintiffs failed to allege direct physical loss or damage; dismissal affirmed |
| Whether the distinction between "loss of" and "damage to" allows recovery absent physical alteration | "Loss of" is broader and covers loss of use caused by COVID-19 restrictions | Both terms require a physical trigger; courts require physical loss to trigger coverage | Held: "Loss of" does not remove the physical-loss requirement; plaintiffs did not plausibly allege it |
| Whether the Virus Exclusion affects coverage | Plaintiffs argued the exclusion’s applicability is secondary and only matters if physical loss is alleged | Insurers invoked the Virus Exclusion to bar coverage for COVID-19–related losses | Held: Court did not resolve exclusion’s applicability because plaintiffs failed to plead the threshold physical loss necessary to reach exclusions |
| Whether the complaints met Rule 12(b)(6) plausibility pleading standards | Plaintiffs alleged sufficient facts (closures, purchases, economic losses) to state claim | Insurers argued allegations do not plausibly show a covered physical loss | Held: Complaints insufficient under Twombly/Iqbal; dismissal proper |
Key Cases Cited
- Topp's Mech., Inc. v. Kinsale Ins. Co., 968 F.3d 854 (8th Cir. 2020) (standard for de novo review of 12(b)(6) in Eighth Circuit insurance cases)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (plausibility pleading standard for complaints)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (establishes plausibility requirement under Rule 8)
- Pentair, Inc. v. American Guarantee & Liability Ins. Co., 400 F.3d 613 (8th Cir. 2005) (requires a physical loss to trigger property-insurance coverage)
- Oral Surgeons, P.C. v. Cincinnati Ins. Co., 2 F.4th 1141 (8th Cir. 2021) (addressed COVID-19–era coverage claims and physical-loss question)
- Universal Underwriters Ins. Co. v. Lou Fusz Auto. Network, Inc., 401 F.3d 876 (8th Cir. 2005) (ordinary meaning applied to policy terms)
- Rice v. Shelter Mut. Ins. Co., 301 S.W.3d 43 (Mo. banc 2009) (Missouri rule: unambiguous policy enforced as written)
- Owners Ins. Co. v. Craig, 514 S.W.3d 614 (Mo. banc 2017) (insurance policies read as a whole; exclusions and definitions considered)