Wakonda Club v. Selective Insurance Company of America, 973 N.W.2d 545

Wakonda Club, a private golf and country club in Des Moines, closed in response to Governor Reynolds’s March 17, 2020 proclamation restricting dine‑in service and later reopened on a limited basis.
Wakonda claimed business‑income losses under its all‑risk commercial property policy, which included a Business Income and Extra Expense endorsement triggered by a suspension of operations "caused by direct physical loss of or damage to property."
The policy also contained a Virus or Bacteria exclusion barring loss or damage caused by any virus.
Selective denied the claim, arguing (1) there was no "direct physical loss of or damage to" the property and (2) any such loss would be excluded by the virus exclusion.
The district court granted summary judgment for Selective; the Iowa Supreme Court affirmed, holding coverage requires a physical element and mere loss of use from government closure does not satisfy the policy trigger.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether "direct physical loss of or damage to property" includes mere loss of use from closure orders	Loss of use of premises due to the shutdown is a "direct physical loss" triggering Business Income and Extra Expense coverage	The phrase requires a physical alteration, contamination, or other tangible impact; mere inability to use the property is not a physical loss	Court: "Direct physical loss" requires a physical element; loss of use alone insufficient; no coverage
Whether the Virus Exclusion applies	Losses stem from the Governor’s proclamation, not from virus contamination, so exclusion should not apply	Even if physical loss existed, the virus exclusion would bar coverage for virus‑related loss or damage	Court: Did not decide because coverage fails on physical‑loss requirement; exclusion unnecessary to resolve but was a basis for the district court
Whether insured had a reasonable expectation of coverage	An ordinary insured would expect business‑interruption protection for forced closures, so reasonable‑expectations doctrine supports coverage	Policy explicitly conditions Business Income coverage on a "direct physical loss," defeating any reasonable expectation of coverage for non‑physical closures	Court: Doctrine inapplicable; explicit policy language foreclosed such expectation

Amish Connection, Inc. v. State Farm Fire & Cas. Co., 861 N.W.2d 230 (Iowa 2015) (standard for reviewing insurance‑policy interpretation)
Greenfield v. Cincinnati Ins. Co., 737 N.W.2d 112 (Iowa 2007) (rules for construing insurance contracts)
Boelman v. Grinnell Mut. Reins. Co., 826 N.W.2d 494 (Iowa 2013) (give words ordinary meaning; avoid superfluity)
Kartridg Pak Co. v. Travelers Indem. Co., 425 N.W.2d 687 (Iowa Ct. App. 1988) ("physical" excludes purely intangible/economic loss)
Phoenix Ins. Co. v. Infogroup, Inc., 147 F. Supp. 3d 815 (S.D. Iowa 2015) (Iowa‑law application concluding a physical invasion/element is required)
Nat'l Union Fire Ins. Co. v. Terra Indus., Inc., 346 F.3d 1160 (8th Cir. 2003) (contamination can constitute physical loss)
Pentair, Inc. v. Am. Guarantee & Liab. Ins., 400 F.3d 613 (8th Cir. 2005) (loss of use without physical impact insufficient)
Source Food Tech., Inc. v. U.S. Fid. & Guar. Co., 465 F.3d 834 (8th Cir. 2006) (inability to use property does not equal physical loss)
Oral Surgeons, P.C. v. Cincinnati Ins. Co., 2 F.4th 1141 (8th Cir. 2021) (policy language contemplates tangible alteration for restoration period)
10012 Holdings, Inc. v. Sentinel Ins. Co., 21 F.4th 216 (2d Cir. 2021) (COVID‑closure orders do not constitute "direct physical loss")