Oral Surgeons, P.C. v. The Cincinnati Insurance Co., 2f4th1141

Oral Surgeons, P.C. (Iowa dental practice) suspended non-emergency procedures in March 2020 after Iowa’s COVID-19 emergency restrictions and resumed in May 2020.
Oral Surgeons submitted an insurance claim to The Cincinnati Insurance Company for lost business income and extra expense under a policy covering losses “caused by direct ‘loss’ to property,” defined as “accidental physical loss or accidental physical damage.”
Cincinnati denied coverage, asserting no direct physical loss or damage to the insured property occurred.
District court granted Cincinnati’s motion to dismiss; Oral Surgeons appealed. The Eighth Circuit reviewed de novo and applied Iowa law.
The Eighth Circuit held the policy requires a physical loss or physical damage (physical alteration, contamination, or destruction); loss of use alone is insufficient and the complaint failed to allege any physical alteration.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether COVID-19 and related government restrictions constitute “direct physical loss or physical damage” to trigger business‑interruption coverage	Pandemic and government orders deprived Oral Surgeons of use of premises—this is a “physical loss”	No tangible, physical alteration, contamination, or destruction of property occurred	No—loss of use without physical alteration is not “direct physical loss or damage”
Whether the policy’s disjunctive phrasing is ambiguous so that “physical loss” can mean loss of use	“Physical loss” should be read to include inability to use property (loss of operations)	Language is unambiguous; “physical” requires material/perceptible injury	Unambiguous—must be physical; contra proferentem does not apply

Sletten & Brettin Orthodontics, LLC v. Cont’l Cas. Co., 782 F.3d 931 (8th Cir. 2015) (standard of review for insurance coverage appeal)
Pentair, Inc. v. Am. Guar. & Liab. Ins. Co., 400 F.3d 613 (8th Cir. 2005) (loss of use does not automatically equal direct physical loss)
Source Food Tech., Inc. v. U.S. Fid. & Guar. Co., 465 F.3d 834 (8th Cir. 2006) (government regulation causing inability to use goods is not necessarily a physical loss)
The Phx. Ins. Co. v. Infogroup, Inc., 147 F. Supp. 3d 815 (S.D. Iowa 2015) (interpreting “physical” as material or perceptible alteration)
Boelman v. Grinnell Mut. Reinsurance Co., 826 N.W.2d 494 (Iowa 2013) (policy interpretation focuses on parties’ intent and plain meaning)
T.H.E. Ins. Co. v. Est. of Booher, 944 N.W.2d 655 (Iowa 2020) (ambiguity exists only if two reasonable interpretations of policy language exist)
Cairns v. Grinnell Mut. Reinsurance Co., 398 N.W.2d 821 (Iowa 1987) (definition of ambiguity in insurance contracts)
Nat’l Sur. Corp. v. Westlake Invs., LLC, 880 N.W.2d 724 (Iowa 2016) (courts will not rewrite unambiguous insurance policies to impose liability on insurers)