515 F.Supp.3d 1218
M.D. Fla.2021Background
- Rococo Steak, LLC purchased a property insurance policy from Aspen Specialty effective Oct 17, 2019–Oct 17, 2020 and operated a fine‑dining restaurant in St. Petersburg, FL.
- In March 2020 state and county COVID‑19 orders closed on‑premises dining; Rococo alleges suspension of operations, lost business income, and extra expenses.
- Rococo claimed coverage under three policy provisions: Business Income, Extra Expense, and Civil Authority; each provision conditions coverage on "direct physical loss of or damage to" property (or damage to other property for civil authority).
- Aspen denied coverage; Rococo sued in state court for declaratory judgment and breach of contract; Aspen removed and moved to dismiss under Fed. R. Civ. P. 12(b)(6).
- The court applied Florida law and Eleventh Circuit precedent requiring an actual, tangible diminution or physical alteration to establish "direct physical loss or damage."
- The court dismissed Rococo’s claims with prejudice, holding the complaint alleged only economic losses or harms remediable by cleaning/treatment and therefore failed to allege the required direct physical loss or damage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether COVID‑19 caused "direct physical loss of or damage to" the insured property, triggering Business Income coverage | COVID‑19 physically contaminated surfaces and/or impaired the restaurant’s habitability/functionality — both qualify as physical loss | Policy requires actual, tangible physical loss/damage; allegations describe only economic loss or condition fixable by cleaning | No; plaintiff failed to allege the tangible, structural or irreparable physical damage required |
| Whether Extra Expense coverage is triggered by pandemic losses | Extra expenses were "necessary" due to direct physical loss/damage from COVID‑19 | Extra Expense requires those costs to be caused by direct physical loss/damage | No; same failure to plead direct physical loss/damage defeats Extra Expense claim |
| Whether Civil Authority coverage applies based on government closure orders | Government orders prohibiting on‑premises dining were issued in response to dangerous physical conditions and effectively prohibited access to the premises | Civil Authority requires damage to other property and a civil‑authority prohibition of access to the immediate area in response to physical damage | No; plaintiff did not allege damage to surrounding property or that access was prohibited (take‑out/delivery remained available) |
| Whether dismissal should be without prejudice or with leave to amend | Rococo sought leave to amend if pleading deficiency is curable | Aspen argued amendment would be futile given the pleaded facts and controlling law | Dismissal with prejudice — the court found amendment would be futile |
Key Cases Cited
- Mama Jo’s Inc. v. Sparta Ins. Co., [citation="823 F. App'x 868"] (11th Cir. 2020) (interpreting "direct physical loss" to require actual, tangible damage/diminution in value)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (pleading requires factual matter sufficient to raise a right to relief above speculative level)
- Papasan v. Allain, 478 U.S. 265 (1986) (courts need not accept legal conclusions as factual allegations)
- Swire Pacific Holdings, Inc. v. Zurich Ins. Co., 845 So. 2d 161 (Fla. 2003) (plain, unambiguous policy language controls interpretation)
- Interline Brands, Inc. v. Chartis Specialty Ins. Co., 749 F.3d 962 (11th Cir. 2014) (ambiguities construed for coverage only when dual reasonable meanings exist)
- Mid‑Continent Casualty Co. v. American Pride Building Co., 601 F.3d 1143 (11th Cir. 2010) (apply forum state substantive law in diversity cases)
- Gulf Tampa Drydock Co. v. Great Atlantic Insurance Co., 757 F.2d 1172 (11th Cir. 1985) (interpretation of insurance contracts is a question of law)
- Corsello v. Lincare, Inc., 428 F.3d 1008 (11th Cir. 2005) (amendment may be denied as futile)