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
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
January 6, 2023
Argued: September 28, 2022
Before: CHAGARES, Chief Judge, McKEE*, and PORTER, Circuit Judges
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
On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Nо. 2:20-cv-03342) District Judge: Honorable Joshua D. Wolson
No. 20-3594
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
No. 21-1038
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
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
No. 21-1061
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
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
No. 21-1107
On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 2:20-cv-04238) District Judge: Honorablе Chad F. Kenney
No. 21-1109
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
No. 21-1175
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
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
No. 21-1294
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
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
No. 21-1414
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
(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]
Florio Perrucci Steinhardt Cappelli Tipton & Taylor
91 Larry Holmes Drive, Suite 200
Easton, PA 18042
Counsel for Appellant in No. 20-3594
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
Hunton Andrews Kurth
200 Park Avenue
52nd Floor
New York, NY 10166
Counsel for Appellant in No. 21-1061
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
Beasley Allen Crow Methvin Portis & Miles
218 Commerce Street
Montgomery, AL 36104
Counsel for Appellant in 21-1294, 21-1106 & 21-1107
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
Alan M. Feldman
Edward S. Goldis
Daniel J. Mann
Andrew K. Mitnick
Bethany R. Nikitenko
Feldman Shepherd Wohlgelernter Tanner Weinstock & Dodig
1845 Walnut Street, 21st Floor
Philadelphia, PA 19103
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
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
Seeger Weiss
55 Challenger Road, 6th Floor
Ridgefield Park, NJ 07660
Counsel for Appellants in Nos. 21-1414 & 21-1315
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 1400
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
Gabriel K. Gillett
Jenner & Block
353 North Clark Street, Suite 4500
Chicago, IL 60654
Counsel for Amici Appellants Pennsylvania Restaurant & Lodging Association and Restaurant Law Center in Nos. 20-3124, 21-1038, 21-1039, 21-1106, 21-1107, 21-1109, 21-1175, 21-1240 & 21-1294
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
Liberty View, Suite 400
Cherry Hill, NJ 08002
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
New Haven, CT 06510
Counsel for Appellee in Nos. 21-1240, 21-1106, 21-1107, 21-1315 & Appellee Hartford Casualty Insurance Company in No. 20-3124
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
Caitlin R. Tharp
Steptoe & Johnson
1330 Connecticut Avenue, N.W.
Washington, DC 20036
Counsel for Appellee in No. 21-1240
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
DLA Piper
845 Texas Avenue, Suite 3800
Houston, TX 77002
Counsel for Appellee in No. 21-1061
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
Gregory L. Mast
Fields Howell
665 8th Street, N.W.
Atlanta, GA 30318
Counsel for Appellee in No. 21-1175
Michael E. DiFebbo, Jr.
Elizabeth A. Sutton
Kennedys CMK
1600 Market Street, Suite 1410
Philadelphia, PA 19103
Kristin V. Gallagher
Kennedys CMK
120 Mountain View Boulevard
P.O. Box 650
Basking Ridge, NJ 07920
Francis X. Simpson, III
Fowler Hirtzel McNulty & Spaulding
1717 Arch Street, Suite 1310
Philadelphia, PA 19103
Counsel for Appellee in 21-1294
Laura A. Brady
William T. Corbett, Jr.
Coughlin Midlige & Garland
350 Mount Kemble Avenue
P.O. Box 1917
Morristown, NJ 07962
Kenneth J. Brown
Amy M. Saharia
CHAGARES, Chief Judge.
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
The businesses then filed lawsuits against their insurers to enforce coverage, arguing that their loss of the ability to usetheir properties for the properties’ intended business purposes is a “physical loss of” property and that no exclusions bar coverage, either because the exclusions do not apply or because the insurers are estopped from arguing that they do. The insurers filed dispositive motions, and the respective District Courts all found for the insurers. The businesses appealed.
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 gоvernors 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 fоr 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.
55-56. See also J.A. 1198-99, 1615, 2272-73; E.C.J.A. 96-97;
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; ToppersApp. 64-65; I.P.J.A. 139-40, 329-30 (using materially similar language, with some difference — immaterial to this dispute — as to when the period of restoration starts).
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
II.
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 noissues of material fact exist and the party for whom judgment is entеred is entitled to judgment as a matter of law.” Prusky, 445 F.3d at 699. Because the businesses’ claims arise under state law, we predict how the Supreme Courts of Pennsylvania and New Jersey would decide the issues before us.4 Koppers Co. v. Aetna Cas. & Sur. Co., 98 F.3d 1440, 1445 (3d Cir. 1996).
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 meaningof its terms. Am. Auto. Ins. Co., 658 F.3d at 320; Cypress Point Condo. Ass‘n, Inc. v. Adria Towers, L.L.C., 143 A.3d 273, 280 (N.J. 2016).
Where the policy language is clear and unambiguous, we must enforce
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,589 F.3d 105, 111 (3d Cir. 2009) (applying Pennsylvania law); Hartford Accident & Indem. Co. v. Aetna Life & Cas. Ins. Co., 483 A.2d 402, 408 (N.J. 1984). The insurer then beаrs the burden to demonstrate that a policy exclusion applies. State Farm Fire & Cas. Co., 589 F.3d at 111; Hartford Accident & Indem. Co., 483 A.2d at 409. “[E]xclusions are always strictly construed against the insurer and in favor of the insured.” Nationwide Mut. Ins. Co. v. Cosenza, 258 F.3d 197, 206-07 (3d Cir. 2001) (applying Pennsylvania law); see also Villa v. Short, 947 A.2d 1217, 1222 (N.J. 2008). If an exclusion applies, the insured then bears the burden to show an exception to that exclusion applies to restore coverage. Cypress Point Condo. Ass‘n, 143 A.3d at 286 (applying New Jersey law); N. Ins. Co. of N.Y. v. Aardvark Assocs., Inc., 942 F.2d 189, 195 (3d Cir. 1991) (applying Pennsylvania law).
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 ofor damage to” the properties. The businesses argue that the loss of their ability to use their properties for their intended business purposes constitutes “physical loss of” the properties. We disagree.
1.
The policies do not define the phrase “physical loss of or damage,” so we start with the plain meaning of the text. Loss
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.
In Port Authority, however, we explained that “[p]hysical damage to a building as an entity by sources unnoticeable to the naked eye must meet a higher threshold.” Id. We held that in the case of asbestos contamination, physical loss or damage to property occurred
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 rеsultant 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 oruninhabitable, or that there was an imminent risk of either of those things happening.
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 аbility 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
At bottom, loss of use caused by government edict and untethered to the physical condition of the premises is not aphysical loss or damage to the properties. We therefore hold that loss of use of intended purpose under the circumstances presented here is not a physical loss of property within the meaning of the policies.6
Other terms in the policies support our conclusion that loss of use must involve some physicality. For instance,coverage exists only during the “period of restoration,” which ends when the property should be “repaired, rebuilt or replaced” or is moved to a new location. As Toppers conceded during oral argument, there is nothing to repair, rebuild, or replace in any of these cases. The businesses’ loss of use would be — and was — cured by an end to the closure orders, and not by the rebuilding or repairing of any property. We must read the policies as a whole and give effect to the whole policy, including the “period of restoration” language. See USX Corp. v. Liberty Mut. Ins. Co., 444 F.3d 192, 200 (3d Cir. 2006) (“Pennsylvania courts long have admonished that ‘contract terms will not be construed in such a manner so as to render them meaningless,’
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 threе 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
2.
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 agreewith the businesses that the definition of the term “loss” can include loss of use. But it does not follow that every loss of use is necessarily a physical loss, and for the
One business, 1 S.A.N.T., Inc. (“1 S.A.N.T.“), argues that under Port Authority, we must look to thе 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.
Several businesses similarly argue that the actual or suspected presence of the coronavirus on their premises rendered the properties unsafe and uninhabitable, comparing the coronavirus to contamination by noxious substances, such as ammonia or gasoline, which courts have determined to be covered under commercial insurance policies. Where courts have found that such a substance caused physical loss or damage, however, the substance was present to such a degree that it became physically dangerous to be inside of the building, rendering the building useless until there was some kind of remediation. See Gregory Packaging, Inc. v. Travelers Prop. Cas. Co. of Am., No. 2:12-cv-04418, 2014 WL 6675934, at *6 (D.N.J. Nov. 25, 2014) (finding “physical loss of or damage to” property where an ammonia release in a packaging facility “physically transformed the air . . . so that it contained an unsafe amount of ammonia or that the heightened ammonia levels rendered the facility unfit for occupancy until the ammonia could be dissipated“); W. Fire Ins. Co. v. First Presbyterian Church, 437 P.2d 52, 55 (Colo. 1968) (holding that an accumulation of gasoline around a church constituted a “loss of use” when the building “becamе so infiltrated and saturated” with gasoline that it became “uninhabitable“).
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 pointthat there was such infiltration and contamination of the foundation, walls and rooms of the church building as to render it uninhabitable and make the continued use thereof
Toppers and 1 S.A.N.T. argue that we should ignore the “period of restoration” language in the policies. They say, respectively, that language is relevant only when coverage may be prematurely terminated or when a repair is needed. But that is not what the policies say. Rather, the policies provide that the insurers “will pay for the [losses the businesses] sustain due to the necessary ‘suspension’ of [their] ‘operations’ during the ‘period of restoration‘.” J.A. 1865 (emphasis added); see also Toppers App. 55 (using the same language). By providing business income and extra expense coverage only during the period of restoration, the plain language of the policies makes the period of restoration language relevant to any business income or extra expense claim. We must look to the text of the policies and when that text is clear, as it is here, enforce that language as written. Am. Auto. Ins. Co., 658 F.3d at 321; Cypress Point Condo. Ass‘n, 143 A.3d at 280. We therefore must consider the period of restoration language.
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 LLCand In The Park Chateau Caterers LLC (together, “Park Caterers“), in particular, argue that because some courts have found physical loss or damage in purportedly similar circumstances, the phrase “physical loss of or damage” must be ambiguous. We are unconvinced. Pennsylvania law rejects the idea that differing outcomes necessarily means that policy language is ambiguous. See Madison Constr. Co., 735 A.2d at 106-08 (applying Pennsylvania law) (finding the definition of
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
B.
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 authoritygrounded airplanes, which “may have tеmporarily obviated the need for Plaintiff‘s parking services” but “did not prohibit access to Plaintiff‘s garages and therefore c[ould] not be used to invoke coverage under Plaintiff‘s [insurance] policy“); see also S. Hosp., Inc. v. Zurich Am. Ins. Co., 393 F.3d 1137, 1141 (10th Cir. 2004) (“We hold that the civil authority provision does not apply because the FAA‘s order grounding flights did not itself prevent, bar, or hinder access to Southern Hospitality‘s hotels in a manner contemplated by the policies.“).
For these reasons, we further hold that the businesses have failed to establish civil authority coverage. The Court empathizes
IV.
For the foregoing reasons, we will affirm the judgments and orders of the District Courts.