Real Hospitality, LLC v. Travelers Casualty Insurance Company of America, 499 F.Supp.3d 288

Background

Real Hospitality, LLC (Ed’s Burger Joint) is a Mississippi restaurant insured by Travelers under a Businessowners commercial property policy that includes Business Income and Extra Expense coverages.
State and local COVID-19 orders in March 2020 restricted and then suspended dine‑in services; the restaurant closed and suspended operations.
The Policy covers losses caused by “direct physical loss of or damage to property at the described premises” and defines the Period of Restoration as beginning with the date of direct physical loss or damage; the Policy also contains a clear “Exclusion of Loss Due to Virus or Bacteria.”
Plaintiff sued for declaratory relief and breach of contract, seeking Business Income/Extra Expense coverage for pandemic‑related closures and sought class certification.
Travelers moved to dismiss under Rule 12(b)(6), arguing the complaint fails to plead physical loss or damage and that the virus exclusion bars coverage; the court applied Mississippi law.
The court granted the motion, holding the complaint did not allege direct physical loss or damage and, alternatively, the virus exclusion would preclude coverage.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Business Income/Extra Expense is triggered without physical loss or damage	Loss of use/usability from civil orders suffices as a “direct physical loss of” property	Policy requires a physical loss or physical damage to covered property to trigger Business Income	Dismissed — policy requires physical loss or damage; loss of use from orders is not alleged physical loss/damage
Whether the phrase “direct physical loss of or damage to” includes non‑tangible loss of use	“Loss of” should be read separately from “damage” and can include loss of usability	The disjunctive terms still modify “property,” and context (Period of Restoration, repair language) contemplates physical loss or damage	Rejected — reading policy as a whole shows coverage tied to physical loss/damage; Plaintiff’s reading is implausible
Whether the Period of Restoration language supports Plaintiff’s broader reading	Lifting of executive orders restores usability and thus ends restoration	Period of Restoration begins with physical loss/damage and ends when property is repaired/rebuilt or business resumes at a new permanent location	Rejected — Period of Restoration language reinforces requirement of physical loss/damage and repair/rebuild concepts
Whether the virus exclusion bars coverage even if physical loss/damage were alleged	Exclusion is ambiguous and should not preclude coverage for economic losses from orders	Virus exclusion explicitly excludes loss or damage caused by any virus; Plaintiff ties losses to COVID‑19	Held — virus exclusion plainly applies to losses caused by COVID‑19 and would preclude coverage

Key Cases Cited

Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must state a plausible claim)
Ashcroft v. Iqbal, 556 U.S. 662 (2009) (factual allegations must permit reasonable inference of liability)
Great Lakes Dredge & Dock Co. LLC v. Louisiana State, 624 F.3d 201 (5th Cir. 2010) (applies Twombly/Iqbal standards)
Hartford Underwriters Ins. Co. v. Foundation Health Servs., 524 F.3d 588 (5th Cir. 2008) (choice‑of‑law for insurance contracts)
Sorrels Steel Co. v. Great Southwest Corp., 906 F.2d 158 (5th Cir. 1990) (choice‑of‑law principles)
Hankins v. Maryland Cas. Co., 101 So. 3d 645 (Miss. 2012) (insurance policy interpretation is a question of law)
Wooten v. Mississippi Farm Bureau Ins. Co., 924 So. 2d 519 (Miss. 2006) (plain‑meaning approach to policy language)
Paul Revere Life Ins. Co. v. Prince, 375 So. 2d 417 (Miss. 1979) (apply policy as written when unambiguous)
United States Fid. & Guar. Co. of Miss. v. Martin, 998 So. 2d 956 (Miss. 2008) (policy must be read as a whole)
TRAVCO Ins. Co. v. Ward, 715 F. Supp. 2d 699 (E.D. Va. 2010) (contamination/physical presence of hazardous substance can render premises unusable)