Sagome v. Cincinnati Insurance Company, 56 F.4th 931

Sagome, Inc. operated L’Hostaria in Aspen and was insured by The Cincinnati Insurance Company under a commercial policy covering "accidental physical loss or accidental physical damage" and business-income and civil-authority losses tied to such covered loss.
COVID-19 pandemic and government orders in March 2020 forced L’Hostaria to suspend operations temporarily; it later reopened with limited services.
Sagome notified Cincinnati of its losses; Cincinnati denied coverage, asserting the policy requires physical loss or damage, which COVID-19 did not cause.
Sagome sued for breach of contract, bad faith, Colorado insurance-law violations, and declaratory relief; Cincinnati moved to dismiss under Rule 12(b)(6).
The district court dismissed with prejudice, finding no direct physical loss or damage and no triggering civil-authority coverage; the Tenth Circuit affirmed under Colorado law.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether COVID-19 caused "direct physical loss or accidental physical damage" to insured property	Sagome: presence/transmission of virus and loss of use rendered property unsafe—thus physical loss/damage	Cincinnati: policy requires tangible physical injury or alteration; temporary loss of use is not physical loss	Held: No. COVID-19 did not cause physical loss/damage under the policy plain meaning
Whether "loss of use" (property rendered unsafe/dangerous) qualifies as physical loss under Colorado precedent (Western Fire)	Sagome: Western Fire shows loss of use can be physical loss without visible alteration	Cincinnati: Western Fire is distinguishable; it required infiltration/saturation rendering property uninhabitable	Held: Distinguishable. Western Fire permits recovery only where property is rendered uninhabitable/unsafe by physical contamination; that did not occur here
Whether civil-authority coverage is triggered by government closure orders due to COVID-19 elsewhere	Sagome: government prohibitions of access after virus spread should trigger coverage	Cincinnati: civil-authority coverage requires covered loss to other property causing the authority action; virus presence is not a covered loss	Held: No. Civil-authority coverage not triggered because there was no covered physical loss to other property

Goodwill Industries of Central Oklahoma, Inc. v. Philadelphia Indemnity Ins. Co., 21 F.4th 704 (10th Cir. 2021) (refused to equate temporary loss of use from COVID-19 restrictions with direct physical loss)
Western Fire Insurance Co. v. First Presbyterian Church, 437 P.2d 52 (Colo. 1968) (Colorado Supreme Court: contamination saturating property to the point of uninhabitability can constitute direct physical loss)
U.S. Fidelity & Guaranty Co. v. Budget Rent‑A‑Car Systems, Inc., 842 P.2d 208 (Colo. 1992) (contract terms must be read together; cannot isolate words like "physical")
Dukes Clothing, LLC v. Cincinnati Ins. Co., 35 F.4th 1322 (11th Cir. 2022) (COVID-19 presence does not physically alter property within plain meaning)
Ferrer & Poirot, GP v. Cincinnati Ins. Co., 36 F.4th 656 (5th Cir. 2022) (COVID-19 harms people but does not physically damage property under policy language)
Adams‑Arapahoe Joint School District No. 28‑J v. Continental Ins. Co., 891 F.2d 772 (10th Cir. 1989) (corrosion causing unsafe, unusable school constituted covered loss under Western Fire)
Verveine Corp. v. Strathmore Ins. Co., 184 N.E.3d 1266 (Mass. 2022) (mere transient presence of virus does not equal loss or damage; contamination requiring active remediation might)