RHONDA H. WILSON; THE LAW OFFICES OF RHONDA HILL WILSON, P.C., Appellants v. USI INSURANCE SERVICE LLC; HARTFORD CASUALTY INSURANCE COMPANY; TOPPERS SALON & HEALTH SPA, INC., Appellant v. TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA; 4431, INC.; 4431 ASSOC., LP; 3354 WALBERT ASSOC., LP; 3354 WALBERT AVENUE ASSOCIATES, LLC; BLUE GRILLE HOUSE AND WINE BAR; 4131 ASSOCIATES CANDLELIGHT INN; 2960 CENTER VALLEY PARKWAY, LLC; 3739 WEST CHESTER PIKE, LLC; MELT RESTAURANT GROUP, LLC; PAXOS RESTAURANTS, INC.; MELT REAL ESTATE GROUP, LP; TOP CUT STEAKHOUSE, Appellants v. CINCINNATI INSURANCE COMPANIES; CINCINNATI INSURANCE COMPANY; CINCINNATI CASUALTY COMPANY; CINCINNATI INDEMNITY COMPANY; LH DINING L.L.C., d/b/a River Twice Restaurant, Appellant v. ADMIRAL INDEMNITY COMPANY; NEWCHOPS RESTAURANT COMCAST LLC, d/b/a CHOPS, Appellant v. ADMIRAL INDEMNITY COMPANY; BOULEVARD CARROLL ENTERTAINMENT GROUP, INC., Appellant v. FIREMAN’S FUND INSURANCE COMPANY; ADRIAN MOODY; ROBIN JONES, d/b/a Moody Jones Gallery, Appellants v. TWIN CITY FIRE INSURANCE COMPANY; ATCM OPTICAL, INC; OMEGA OPTICAL, INC; OMEGA OPTICAL AT COMCAST CENTER LLC, d/b/a OMEGA Optical, Appellants v. TWIN CITY FIRE INSURANCE COMPANY; 1 S.A.N.T., INC., Appellant v. NATIONAL FIRE & MARINE INSURANCE COMPANY; INDEPENDENCE RESTAURANT GROUP, LLC on behalf of itself and all others similarly situated d/b/a Independence Beer Garden, Appellant v. CERTAIN UNDERWRITERS AT LLOYD’S, LONDON; ULTIMATE HEARING SOLUTIONS II, LLC; ULTIMATE HEARING SOLUTIONS III, LLC; ULTIMATE HEARING SOLUTIONS IV, LLC; ULTIMATE HEARING SOLUTIONS V, LLC; ULTIMATE HEARING SOLUTIONS VI, LLC, Appellants v. TWIN CITY FIRE INSURANCE COMPANY; WHISKEY FLATS INC., T/A Out of Wack Jack’s Bar & Grill, Appellant v. AXIS INSURANCE COMPANY; THE EYE CARE CENTER OF NEW JERSEY, PA, on behalf of itself and all others similarly situated, Appellant v. TWIN CITY FIRE INSURANCE COMPANY; IN THE PARK SAVOY CATERERS LLC, t/a The Park Savoy; IN THE PARK CHATEAU CATERERS LLC, on behalf of itself and all others similarly situated, Appellants v. SELECTIVE INSURANCE GROUP INC.; SELECTIVE CASUALTY INSURANCE COMPANY
No. 20-3124, No. 20-3501, No. 20-3594, No. 21-1038, No. 21-1039, No. 21-1061, No. 21-1106, No. 21-1107, No. 21-1109, No. 21-1175, No. 21-1240, No. 21-1294, No. 21-1315, No. 21-1414
United States Court of Appeals for the Third Circuit
January 6, 2023
2023 Decisions 19
Before: CHAGARES, Chief Judge, McKEE, and PORTER, Circuit Judges
UNITED STATES COURT OF APPEALS
No. 20-3124
RHONDA H. WILSON; THE LAW OFFICES OF RHONDA HILL WILSON, P.C., Appellants v. USI INSURANCE SERVICE LLC; HARTFORD CASUALTY INSURANCE COMPANY
On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 2:20-cv-03384) District Judge: Honorable Eduardo C. Robreno
No. 20-3501
TOPPERS SALON & HEALTH SPA, INC., Appellant v. TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA
On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 2:20-cv-03342) District Judge: Honorable Joshua D. Wolson
4431, INC.; 4431 ASSOC., LP; 3354 WALBERT ASSOC., LP; 3354 WALBERT AVENUE ASSOCIATES, LLC; BLUE GRILLE HOUSE AND WINE BAR; 4131 ASSOCIATES CANDLELIGHT INN; 2960 CENTER VALLEY PARKWAY, LLC; 3739 WEST CHESTER PIKE, LLC; MELT RESTAURANT GROUP, LLC; PAXOS RESTAURANTS, INC.; MELT REAL ESTATE GROUP, LP; TOP CUT STEAKHOUSE, Appellants v. CINCINNATI INSURANCE COMPANIES; CINCINNATI INSURANCE COMPANY; CINCINNATI CASUALTY COMPANY; CINCINNATI INDEMNITY COMPANY
On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 5:20-cv-04396) District Judge: Honorable Joseph F. Leeson, Junior
LH DINING L.L.C., d/b/a River Twice Restaurant, Appellant v. ADMIRAL INDEMNITY COMPANY
On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 2:20-cv-01869) District Judge: Honorable Timothy J. Savage
No. 21-1039
NEWCHOPS RESTAURANT COMCAST LLC, d/b/a CHOPS, Appellant v. ADMIRAL INDEMNITY COMPANY
On Appeal from the District Court for the Eastern District of Pennsylvania (D.C. No 2:20-cv-01949) District Judge: Honorable Timothy J. Savage
BOULEVARD CARROLL ENTERTAINMENT GROUP, INC., Appellant v. FIREMAN’S FUND INSURANCE COMPANY
On Appeal from the United States District Court for the District of New Jersey (D.C. No. 2:20-cv-11771) District Judge: Honorable Susan D. Wigenton
No. 21-1106
ADRIAN MOODY; ROBIN JONES, d/b/a Moody Jones Gallery, Appellants v. TWIN CITY FIRE INSURANCE COMPANY
On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 2:20-cv-02856) District Judge: Honorable Chad F. Kenney
ATCM OPTICAL, INC; OMEGA OPTICAL, INC; OMEGA OPTICAL AT COMCAST CENTER LLC, d/b/a OMEGA Optical, Appellants v. TWIN CITY FIRE INSURANCE COMPANY
On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 2:20-cv-04238) District Judge: Honorable Chad F. Kenney
No. 21-1109
1 S.A.N.T., INC., Appellant v. NATIONAL FIRE & MARINE INSURANCE COMPANY
On Appeal from the United States District Court for the Western District of Pennsylvania (D.C. No. 2:20-cv-00862) District Judge: Honorable William S. Stickman, IV
INDEPENDENCE RESTAURANT GROUP, LLC on behalf of itself and all others similarly situated d/b/a Independence Beer Garden, Appellant v. CERTAIN UNDERWRITERS AT LLOYD’S, LONDON
On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 2:20-cv-02365) District Judge: Honorable Chad F. Kenney
No. 21-1240
ULTIMATE HEARING SOLUTIONS II, LLC; ULTIMATE HEARING SOLUTIONS III, LLC; ULTIMATE HEARING SOLUTIONS IV, LLC; ULTIMATE HEARING SOLUTIONS V, LLC; ULTIMATE HEARING SOLUTIONS VI, LLC, Appellants v. TWIN CITY FIRE INSURANCE COMPANY
On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 2:20-cv-02401) District Judge: Honorable Chad F. Kenney
WHISKEY FLATS INC., T/A Out of Wack Jack’s Bar & Grill, Appellant v. AXIS INSURANCE COMPANY
On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 2:20-cv-03451) District Judge: Honorable Chad F. Kenney
No. 21-1315
THE EYE CARE CENTER OF NEW JERSEY, PA, on behalf of itself and all others similarly situated, Appellant v. TWIN CITY FIRE INSURANCE COMPANY
On Appeal from the United States District Court for the District of New Jersey (D.C. No. 2:20-cv-05743) District Judge: Honorable Kevin McNulty
IN THE PARK SAVOY CATERERS LLC, t/a The Park Savoy; IN THE PARK CHATEAU CATERERS LLC, on behalf of itself and all others similarly situated, Appellants v. SELECTIVE INSURANCE GROUP INC.; SELECTIVE CASUALTY INSURANCE COMPANY
On Appeal from the United States District Court for the District of New Jersey (D.C. No. 2:20-cv-06869) District Judge: Honorable Madeline C. Arleo
Argued: September 28, 2022
Before: CHAGARES, Chief Judge, McKEE*, and PORTER, Circuit Judges
(Opinion filed: January 6, 2023)
Rhonda H. Wilson, 8 Penn Center, 1628 John F. Kennedy Boulevard, Suite 400, Philadelphia, PA 19103, Counsel for Appellants in No. 20-3124
Daniel J. Dugan [ARGUED], Neal R. Troum, Spector Gadon Rosen & Vinci, 1635 Market Street, 7th Floor, Philadelphia, PA 19103, Counsel for Appellant in No. 20-3501
Robert A. Freedberg, Christian M. Perrucci [ARGUED],
Walter J. Andrews [ARGUED], Hunton Andrews Kurth, 333 Southeast 2 Avenue, Suite 2400, Miami, FL 33131;
Scott P. DeVries, Hunton Andrews Kurth, 50 California Street, Suite 1700, San Francisco, CA 94111;
Michael S. Levine, Hunton Andrews Kurth, 2200 Pennsylvania Avenue, N.W., Washington, DC 20037;
Elbert Lin, Hunton Andrews Kurth, 951 East Byrd Street, Riverfront Plaza, East Tower, Richmond, VA 23219;
John R. Sawyer, Stark & Stark, 993 Lenox Drive, Lawrenceville, NJ 08648;
Kevin V. Small,
Laurence S. Berman, Arnold Levin, Daniel C. Levin, Frederick S. Longer, Levin Sedran & Berman, 510 Walnut Street, Suite 500, Philadelphia, PA 19106, Counsel for Appellants in Nos. 21-1106, 21-1107, 21-1038, 21-1039 & 21-1294
Kenneth J. Grunfeld, Golomb Spirt Grunfeld, 1835 Market Street, Suite 2900, Philadelphia, PA 19103, Counsel for Appellants in Nos. 21-1106, 21-1107, 21-1294, 21-1038 & 21-1039
Richard M. Golomb, Golomb Spirt Grunfeld, 1835 Market Street, Suite 2900, Philadelphia, PA 19103, Counsel for Appellants in Nos. 21-1038, 21-1039 & 21-1294
Wilson D. Miles, III, Rachel N. Minder,
Paul W. Evans, Beasley Allen Crow Methvin Portis & Miles, 218 Commerce Street, Montgomery, AL 36104, Counsel for Appellant in 21-1294
R. Bruce Carlson, Carlson Brown, 222 Broad Street, P.O. Box 242, Sewickley, PA 15143;
Ted A. Hages, Matthew Louik, James C. Martin [ARGUED], Devin M. Misour, George L. Stewart, II, Colin E. Wrabley, Reed Smith, 225 Fifth Avenue, Suite 1200, Pittsburgh, PA 15222;
Kelly K. Iverson, Gary F. Lynch, Lynch Carpenter, 1133 Penn Avenue, 5th Floor, Pittsburgh, PA 15222, Counsel for Appellant in No. 21-1109
James A. Francis, David A. Searles, John Soumilas, Francis Mailman Soumilas, 1600 Market Street, Suite 2510, Philadelphia, PA 19103, Counsel for Appellant in No. 21-1175
Alan C. Milstein, Sherman Silverstein Kohl Rose & Podolsky, 308 Harper Drive, Suite 200, Eastgate Corporate Center, Moorestown, NJ 08057, Counsel for Appellants in No. 21-1240
James E. Cecchi, Brian F. O’Toole [ARGUED], Lindsey H. Taylor, Carella Byrne Cecchi Olstein Brody & Agnello, 5 Becker Farm Road, Roseland, NJ 07068;
Christopher A. Seeger,
Paul J. Geller, Robbins Geller Rudman & Dowd, 120 East Palmetto Park Road, Suite 500, Boca Raton, FL 33432;
Samuel H. Rudman, Robbins Geller Rudman & Dowd, 58 South Service Road, Suite 200, Melville, NY 11747, Counsel for Appellant in No. 21-1315
Bethany Barrese, Saxe Doernberger & Vita, 233 Mount Airy Road, Basking Ridge, NJ 07920;
Brian J. Clifford, Janie A. Eddy, Saxe Doernberger & Vita, 35 Nutmeg Drive, Suite 140, Trumbull, CT 06611;
Gregory D. Podolak, Saxe Doernberger & Vita, 999 Vanderbilt Beach Road, Suite 603, Naples, FL 34108, Counsel for Amicus Appellant Saxe Doernberger & Vita PC
Lisa M. Campisi, Blank Rome, 1271 Avenue of the Americas, New York, NY 10020;
Charles A. Fitzpatrick, IV, Blank Rome, 130 North 18th Street, One Logan Square, Philadelphia, PA 19103, Counsel for Amicus Appellant United Policyholders Nos. 21-1038, 21-1039, 21-1106, 21-1107, 21-1109 & 21-1294
Nicholas M. Insua, Reed Smith, 599 Lexington Avenue, 22nd Floor, New York, NY 10022, Counsel for Amicus Appellant United Policyholders in No. 21-1061
Christopher P. Leise, White & Williams, 457 Haddonfield Road,
Marc L. Penchansky, White & Williams, 1650 Market Street, One Liberty Place, Suite 1800, Philadelphia, PA 19103, Counsel for Appellee USI Insurance Services LLC in No. 20-3124
Wystan M. Ackerman, J. Tyler Butts, Gregory P. Varga, Robinson & Cole, 280 Trumbull Street, One Commercial Plaza, Hartford, CT 06103, Counsel for Appellee in No. 20-3501
Richard D. Gable, Jr., Butler Weihmuller Katz Craig, 1818 Market Street, Suite 2740, Philadelphia, PA 19103, Counsel for Appellee in Nos. 20-3501, 21-1106, 21-1107 & Appellee Hartford Casualty Insurance Company in No. 20-3124
Jonathan M. Freiman, David R. Roth [ARGUED], Wiggin & Dana, One Century Tower, 265 Church Street,
Sarah D. Gordon, Steptoe & Johnson, 1330 Connecticut Avenue, N.W., Washington, DC 20036, Counsel for Appellee in Nos. 21-1315, No. 21-1240, 21-1106, 21-1107 & Appellee Hartford Casualty Insurance Company in No. 20-3124
James L. Brochin, Steptoe & Johnson, 1114 Avenue of the Americas, 35th Floor, New York, NY 10036;
Ryan M. Chabot, Alan E. Schoenfeld, Wilmer Cutler Pickering Hale & Dorr, 7 World Trade Center, 250 Greenwich Street, New York, NY 10007, Counsel for Appellee in No. 21-1315
John J. Kavanagh, Steptoe & Johnson, 1330 Connecticut Avenue, N.W., Washington, DC 20036, Counsel for Appellee in Nos. 21-1106, 21-1107, 21-1240 & Appellee Hartford Casualty Insurance Company in No. 20-3124
Alan I. Becker, Daniel G. Litchfield, Laurence J. W. Tooth, Litchfield Cavo, 303 West Madison Street, Suite 303, Chicago, IL 60606, Counsel for Appellees in No. 20-3594
Eric A. Fitzgerald, Hillary Ladov, McAngus Goudelock & Courie, P.O. Box 12519, Columbia, SC 29211;
Antonia B. Ianniello, John F. O’Connor, Jr., Steptoe & Johnson, 1330 Connecticut Avenue, N.W., Washington, DC 20036, Counsel for Appellees in Nos. 21-1038 & 21-1039
Michael D. Hynes, DLA Piper, 1251 Avenue of the Americas, 27th Floor, New York, NY 10020;
Brett D. Solberg,
Robert L. Byer, Julie S. Greenberg, Duane Morris, 625 Liberty Avenue, Suite 1000, Pittsburgh, PA 15222;
Damon Vocke, Duane Morris, 1540 Broadway, New York, NY 10036, Counsel for Appellee in No. 21-1109
Fred L. Alvarez, David E. Walker, Walker Wilcox Matousek, One North Franklin Street, Suite 3200, Chicago, IL 60606;
Paul L. Fields, Jr., Fields Howell, 665 8th Street, N.W., Atlanta, GA 30318;
Marc R. Kamin, Michael J. Smith, Stewart Smith, 300 Conshohocken State Road, 300 Four Falls Corporate Center, Suite 670, West Conshohocken, PA 19428
The plaintiffs in this consolidated appeal are businesses (collectively, the “businesses“) that closed or significantly limited their operations in March 2020 after the governors of the states in which they operate issued orders to curb the spread of the coronavirus and the disease it causes, COVID-19. To recover the resultant losses, the businesses filed claims under their respective commercial property insurance policies (the “policies“). Their insurers universally denied coverage, reasoning that the businesses did not suffer a “physical loss of or damage to” property necessary to trigger coverage or that a “virus exclusion” applied and barred coverage.
The businesses then filed lawsuits against their insurers to enforce coverage, arguing that their loss of the ability to use
We predict how the Supreme Courts of Pennsylvania and New Jersey would decide the issues before us and hold that the loss of use of a property‘s intended business purpose is not a physical loss of property covered by the businesses’ insurance policies. Because the policies do not cover the businesses’ losses, we need not reach the issue of whether the virus exclusions or any other exclusions apply. We will therefore affirm the judgments and orders of the District Courts.
I.
The plaintiffs are businesses in Pennsylvania, New Jersey, New York, Maryland, and Delaware in the food service, medical, health and wellness, art, music, and legal sectors. In March 2020, to curb the spread of COVID-19, the governors of each of those states issued executive orders closing or restricting the activities of nonessential businesses and urging people to stay home whenever possible (the “closure orders“). The businesses were forced to close or significantly limit their operations as a result. Restaurants had to stop on-premises dining and bar service, while medical providers could no longer perform non-emergent procedures. Some businesses that were considered wholly nonessential, such as fitness centers, had to close entirely.
To recover income lost as a result of the closure orders, the businesses filed claims with their respective insurers under their policies’ business income, extra expense, and civil authority provisions. The business income provisions in the policies provide coverage for “the actual loss of Business Income” that the businesses sustain “due to the necessary ‘suspension’ of [their] ‘operations’ during the ‘period of restoration,‘” when the “suspension [is] caused by direct physical loss of or damage to” the property and the loss or damage is “caused by or resulting from a Covered Cause of Loss.” Joint Consolidated Appendix (“J.A.“) 493, 1198, 1615, 2006, 2272, 2811; Appellees’ Supplemental App. (“S.A.“) 37; Eye Care Joint Appendix (“E.C.J.A.“) 96. See also J.A. 887, 1865; Toppers Joint Appendix (“Toppers App.“) 55; In the Park Joint Appendix (“I.P.J.A.“) 161, 351 (using materially similar language).1 The extra expense provisions provide coverage for extra expenses that the businesses “incur during the ‘period of restoration’ that [they] would not have incurred if there had been no direct physical loss or damage” to the property, “caused by or resulting from a Covered Cause of Loss.” J.A. 493–94, 887, 1865, 2006, 2811–12; Toppers App.
The policies generally define covered cause of loss as “risks of direct physical loss” not otherwise excluded or limited. J.A. 505, 899, 1190, 1607, 1872, 1982, 2264; S.A. 29; Toppers App. 66; E.C.J.A. 88. See also J.A. 2767; B.C.A. 111; 4431 App. 95; I.P.J.A. 150, 340 (using materially similar language). The period of restoration is defined as the time beginning “with the date of direct physical loss or [] damage” and ending on the earlier of (1) the date when the property “should be repaired, rebuilt or replaced with reasonable speed and similar quality,” or (2) the date the business “is resumed at a new, permanent location.” J.A. 1212–13, 1629–30, 2286–87; S.A. 51–52; E.C.J.A. 110–11. See also J.A. 503, 897, 1871, 2013, 2819; B.C.A. 117; 4431 App. 128–29; Toppers
Most of the policies also contain some form of a so-called “virus exclusion” that excludes from coverage losses caused by or relating to a virus. J.A. 516, 910, 1887, 2766; Toppers App. 416; I.P.J.A. 136, 326; J.A. 293; 1284, 1703, 2367; E.C.J.A. 197; J.A. 2029, 2031; B.C.A. 66–67. Some policies also exclude “loss or damage caused directly or indirectly by . . . [t]he enforcement of any ordinance or law . . . [r]egulating the construction, use or repair of any property” (the “ordinance or law exclusion“). J.A. 45–46.
The insurers universally denied the businesses’ claims, and the businesses filed lawsuits in New Jersey and Pennsylvania courts to enforce coverage.3 The insurers filed dispositive motions — to dismiss under
The District Courts had jurisdiction under
We apply the same standard to motions to dismiss and for judgment on the pleadings, Wolfington v. Reconstructive Orthopaedic Assocs. II PC, 935 F.3d 187, 195 (3d Cir. 2019): “we accept the factual allegations in the complaint as true, draw all reasonable inferences in favor of the plaintiff, and assess whether the complaint and the exhibits attached to it ‘contain enough facts to state a claim to relief that is plausible on its face,‘” Watters, 975 F.3d at 412 (motion to dismiss) (quoting Vorchheimer v. Philadelphian Owners Ass‘n, 903 F.3d 100, 105 (3d Cir. 2018)); see also Allah, 226 F.3d at 249 (judgment on the pleadings). We disregard legal conclusions and recitals of the elements of a cause of action that are supported only by mere conclusory statements. Oakwood Lab‘ys LLC v. Thanoo, 999 F.3d 892, 904 (3d Cir. 2021). In reviewing a motion for summary judgment, we apply the same standard as the District Court, “[d]rawing all reasonable inferences in favor of the party against whom judgment is sought” and affirming the grant of the motion “only when no
III.
The businesses challenge the District Courts’ dismissals of their complaints and grants of judgments on the pleadings and summary judgment to the insurers. Central to this challenge is whether the businesses’ inability to use their properties for their intended business purposes constitutes “physical loss of” property as that phrase is used in the policies. Predicting how the Supreme Courts of Pennsylvania and New Jersey would decide this issue and following our decision in Port Authority of New York and New Jersey v. Affiliated FM Insurance Company, 311 F.3d 226 (3d Cir. 2002), we hold that it does not.
Under both Pennsylvania and New Jersey law, our role in interpreting an insurance policy is to “ascertain the intent of the parties as manifested by the language of the written instrument.” Am. Auto. Ins. Co. v. Murray, 658 F.3d 311, 320 (3d Cir. 2011) (quotation marks omitted) (applying Pennsylvania law); Manahawkin Convalescent v. O‘Neill, 85 A.3d 947, 958 (N.J. 2014). We read the policy as a whole and in accordance with the plain and ordinary meaning
Where the policy language is clear and unambiguous, we must enforce that language as written. Am. Auto. Ins. Co., 658 F.3d at 321; Cypress Point Condo. Ass‘n, 143 A.3d at 280. Language is ambiguous “if it is reasonably susceptible of different constructions and capable of being understood in more than one sense.” Hutchison v. Sunbeam Coal Corp., 519 A.2d 385, 390 (Pa. 1986); see also Cypress Point Condo. Ass‘n, 143 A.3d at 280. Ambiguous provisions in an insurance policy must be construed in favor of the insured and against the insurer. Med. Protective Co. v. Watkins, 198 F.3d 100, 104 (3d Cir. 1999) (applying Pennsylvania law); Flomerfelt v. Cardiello, 997 A.2d 991, 996 (N.J. 2010). Whether policy language is ambiguous “is not a question to be resolved in a vacuum.” Madison Constr. Co. v. Harleysville Mut. Ins. Co., 735 A.2d 100, 106 (Pa. 1999). Rather, terms of an insurance policy are ambiguous “if they are subject to more than one reasonable interpretation when applied to a particular set of facts.” Id.; see also Cypress Point Condo. Ass‘n, 143 A.3d at 280. Courts will not, however, “distort the meaning of the language or resort to a strained contrivance in order to find an ambiguity.” Madison Constr. Co., 735 A.2d at 106. And if possible, “a court should interpret the policy so as to avoid ambiguities and give effect to all of its provisions.” Am. Auto. Ins. Co. Auto., 658 F.3d at 321.
To state a successful claim for coverage under an insurance policy, an insured must first make a prima facie showing that its claim falls within the policy‘s grant of coverage. See State Farm Fire & Cas. Co. v. Est. of Mehlman,
We begin our analysis, therefore, considering whether the businesses demonstrated that their claims fall within the policies’ grant of coverage, starting with the business income and extra expense provisions.
A.
To establish coverage under the business income and extra expense provisions,5 the businesses must show that their operations were suspended because of “direct physical loss of
1.
The policies do not define the phrase “physical loss of or damage,” so we start with the plain meaning of the text. Loss means the failure to keep or maintain possession or “the state or fact of being destroyed.” Loss, MERRIAM WEBSTER-UNABRIDGED DICTIONARY ONLINE, https://unabridged.merriam-webster.com/unabridged/loss (last visited Oct. 13, 2022); see also Loss, BLACK‘S LAW DICTIONARY (11th ed. 2019). Damage means “injury or harm to . . . property.” Damage, MERRIAM WEBSTER-UNABRIDGED DICTIONARY ONLINE, https://unabridged.merriam-webster.com/unabridged/damage (last visited Oct. 13, 2022). Under the plain language of the policies, the loss or damage must be physical, which means “natural[,] tangible, concrete,” Physical, OXFORD ENGLISH DICTIONARY ONLINE, https://www.oed.com/view/Entry/143120?rskey=DAEbpp&result=2#eid (last visited Oct. 13, 2022), and “[o]f or relating to, or involving material things; pertaining to real, tangible objects,” Physical, BLACK‘S LAW DICTIONARY (11th ed. 2019).
Physical damage to property therefore typically means “‘a distinct, demonstrable, and physical alteration’ of its structure.” Port Auth. of N.Y. & N.J., 311 F.3d at 235 (quoting 10 Couch on Ins. § 148.46 (3d ed. 1998)). And physical loss of property means a failure to maintain tangible possession of the structure.
only if an actual release of asbestos fibers from asbestos containing materials has resulted in contamination of the property such that its function is nearly eliminated or destroyed, or the structure is made useless or uninhabitable, or if there exists an imminent threat of the release of a quantity of asbestos fibers that would cause such loss of utility.
Id. at 236 (emphasis added).
We applied New Jersey and New York law in Port Authority, but nothing unique about those states’ laws dictated the result. For that reason, and because there is no substantive law in Pennsylvania at odds with our decision, we predict that the Supreme Court of Pennsylvania would adopt a similar principle as Port Authority and hold that Port Authority applies in a case where sources unnoticeable to the naked eye — here, the coronavirus and resultant closure orders — have allegedly reduced the use of the property to a substantial degree. This standard ensures that an insured will have lost tangible possession of property sufficient to constitute physical loss or damage. The businesses therefore must show that the functionalities of their properties were nearly eliminated or destroyed, that the structures were made useless or
The businesses argue that their loss of the ability to use their properties for their intended business purposes meets this standard. We disagree. The businesses’ argument is completely divorced from the physical condition of the premises. The businesses lost the ability to use their properties for their intended business purposes because the governors of the states in which they operate issued orders closing or limiting the activities of nonessential businesses, not because there was anything wrong with their properties. The properties were not destroyed in whole or in part; their structures remained intact and functional.
Regardless, the loss of the ability to use property in certain ways does not render the properties useless or uninhabitable. The properties could certainly be used or inhabited, just not in the way the businesses would have liked. Restaurants remained open for carry out, and medical providers could perform emergency procedures. While we recognize that some wholly nonessential businesses, such as Toppers Salon & Health Spa, Inc. (“Toppers“), had to close entirely for a time, again, that closure and resultant loss of use was due entirely to the closure orders and had nothing to do with the physical condition of the premises. No one was “physically restrained” from entering the businesses’ properties, as counsel for Toppers suggested during oral argument. The closure orders simply prohibited the businesses from using their properties in certain ways.
At bottom, loss of use caused by government edict and untethered to the physical condition of the premises is not a
Other terms in the policies support our conclusion that loss of use must involve some physicality. For instance,
Recent decisions from the Superior Court of New Jersey, Appellate Division, also support our conclusion that the businesses did not suffer physical loss or damage. In three cases like those before us, the Appellate Division determined that loss of use caused by New Jersey‘s closure orders did not constitute physical loss or damage under commercial property insurance policies. See Mac Prop. Grp. LLC & The Cake Boutique LLC v. Selective Fire & Cas. Ins. Co., 278 A.3d 272 (N.J. Super. Ct. App. Div. 2022); AC Ocean Walk, LLC v. Am. Guarantee & Liab. Ins. Co., No. A-1824-21, 2022 WL 2254864 (N.J. Super. Ct. App. Div. June 23, 2022); Rockleigh Country Club, LLC v. Hartford Ins. Grp., No. A-1826-21, 2022 WL 2204374 (N.J. Super. Ct. App. Div. June 21, 2022). Those decisions are a strong indicator of how the Supreme Court of New Jersey would decide the issues before us, see Edwards v. HOVENSA, LLC, 497 F.3d 355, 361 (3d Cir. 2007), and therefore reinforce our conclusion that there is no business income or extra expense coverage here.7
The businesses make several counterarguments, none of which are availing.
First, the businesses argue that because the policies cover “physical loss of or damage to property,” loss must mean something other than damage. We agree, but that does not change our holding. There can be physical loss without damage, such as the case of a landslide “leaving [a] home standing on the edge of and partially overhanging a newly-formed 30-foot cliff” without physically damaging the structure itself, see Hughes v. Potomac Ins. Co. of D.C., 199 Cal. App. 2d 239, 243, 248–49 (Cal. Dist. Ct. App. 1962), or “a portable grill or a delivery truck [being] stolen without a scratch,” Santo‘s Italian Café, 15 F.4th at 404. We also agree
One business, 1 S.A.N.T., Inc. (“1 S.A.N.T.“), argues that under Port Authority, we must look to the functionality of the properties and, to do that, we must look to the properties’ intended use.8 Our discussion of “utility” and “function” in Port Authority, however, was in the context of discussing the building or structure itself, not the purpose for which the structure is used. See Port Auth. of N.Y. & N.J., 311 F.3d at 236 (explaining that loss requires that the “structure” be rendered “uninhabitable and unusable“; that the “form or quantity” of a contaminant must “make the building unusable“; and that there is no loss when the “structure continues to function.” (emphasis added)). When a structure‘s function is nearly eliminated or destroyed, or the property is rendered uninhabitable or unusable, the building itself is rendered completely (or almost completely) useless as a structure until there is remediation or relocation. In other words, there is a complete (or near complete) dispossession of property, regardless of the purpose for which that property is used. This operational utility is what we mean by functionality, not the intended business purpose at or within a property that is physically unaffected.
As we explained in Port Authority, the presence of a dangerous substance alone does not constitute a loss; there is no physical loss until the substance is “in such form or quantity as to make the building unusable.” Port Auth. of N.Y. & N.J., 311 F.3d at 236; see also Western Fire, 437 P.2d at 55 (“[T]here was no direct physical loss sustained on, for example, the first day that gasoline actually seeped onto the insured‘s premises. To the contrary, no direct physical loss was incurred by the insured until the [a]ccumulation of gasoline under and around the church [b]uilt up to the point
Finally, the businesses argue that, at the very least, the policy language is ambiguous. The Eye Care Center of New Jersey, PA (“Eye Care“), and In The Park Savoy Caterers LLC failed to develop the argument adequately in its opening brief. See Barna v. Bd. of Sch. Dirs. of Panther Valley Sch. Dist., 877 F.3d 136, 145 (3d Cir. 2017) (“To be preserved, all arguments must be supported specifically by ‘the reasons for them, with citations to the authorities and parts of the record on which the appellant relies.’ As a result, we have consistently refused to consider ill-developed arguments or those not properly raised and discussed in the appellate briefing.” (quoting
For all these reasons, we hold that no business has met its burden to show business income or extra expense coverage under its respective policy.11
Several businesses also seek civil authority coverage.12
To establish coverage under the civil authority provisions, the businesses must demonstrate physical loss or damage to a property other than the insured premises and that an action of civil authority prohibited access to the insured premises because of that loss or damage. The businesses have not met either requirement.
No business alleged that a property other than the insured premises was damaged or suffered a physical loss or that an action of a civil authority prohibited access to the insured premises because of loss or damage to another property. Indeed, the closure orders were issued not in response to property loss or damage but to mitigate health risks to the public and slow the spread of COVID-19 by limiting person-to-person exposure. Even more fundamentally, the closure orders did not prohibit access to the businesses’ properties. The businesses remained physically accessible; the closure orders merely prohibited certain uses of the buildings. See Philadelphia Parking Auth. v. Fed. Ins. Co., 385 F. Supp. 2d 280, 289 (S.D.N.Y. 2005) (applying Pennsylvania law) (finding no civil authority coverage where the civil authority
For these reasons, we further hold that the businesses have failed to establish civil authority coverage. The Court empathizes with the difficulties that the businesses faced during the pandemic. Our role, however, is to determine whether the policies provide coverage for the businesses’ losses, and we conclude that there is no coverage under the circumstances here. Because no business has demonstrated coverage under its policy, it is unnecessary for us to determine whether the insurers established that the virus or ordinance and law exclusions bar coverage.13
For the foregoing reasons, we will affirm the judgments and orders of the District Courts.