SA PALM BEACH, LLC, оn behalf of itself and all others similarly situated, Plaintiff-Appellant, versus CERTAIN UNDERWRITERS AT LLOYD’S LONDON, UNDERWRITERS AT LLOYDSLONDON KNOWN AS SYNDICATES CNP 4444, AFB 2623, AFB 623, BRT, 2987, BRT 2988, NEO 2468, SAM 727, AXS1686, XIS H4202, QBE 1886, DUW 1729, WBC 5886, CHN 2015, HDU 382, MSP 318, AGR, Defendants-Appellees.
No. 20-14812
United States Court of Appeals For the Eleventh Circuit
May 5, 2022
[PUBLISH]
D.C. Docket No. 9:20-cv-80677-UU
EMERALD COAST RESTAURANTS, INC., Plaintiff-Appellant, versus ASPEN SPECIALTY INSURANCE COMPANY, Defendant-Appellee.
No. 21-10190
United States Court of Appeals For the Eleventh Circuit
May 5, 2022
Appeal from the United States District Court for the Northern District of Florida
D.C. Docket No. 3:20-cv-05898-TKW-HTC
R.T.G. FURNITURE CORP., Plaintiff-Appellant, versus ASPEN SPECIALTY INSURANCE COMPANY, CRUM & FORSTER SPECIALTY INSURANCE COMPANY, EVANSTON INSURANCE COMPANY, EVEREST INDEMNITY INSURANCE COMPANY, HALLMARK SPECIALTY INSURANCE COMPANY, et al., Defendants-Appellees.
No. 21-10490
United States Court of Appeals For the Eleventh Circuit
May 5, 2022
Appeal from the United States District Court for the Middle District of Florida
D.C. Docket No. 8:20-cv-02323-JSM-AEP
ROCOCO STEAK, LLC, d.b.a. Rococo Steak, Plaintiff-Appellant, versus ASPEN SPECIALTY INSURANCE COMPANY, Defendant-Appellee.
No. 21-10672
United States Court of Appeals For the Eleventh Circuit
May 5, 2022
Appeal from the United States District Court for the Middle District of Florida
D.C. Docket No. 8:20-cv-02481-VMC-SPF
Before WILLIAM PRYOR, Chief Judge, and JORDAN and ANDERSON, Circuit Judges.
JORDAN, Circuit Judge:
These cases—which we’ve consolidated for decision following oral argument—present a common question of insurance
The Florida Supreme Court has not addressed the matter. Nor have the Florida intermediate appellate courts. So our analytic endeavor, though informed, is necessarily predictive. Sitting, “in effect, . . . as a state court[,]” Comm’r v. Estate of Bosch, 387 U.S. 456, 465 (1967), we follow the majority view and hold that under Florida law there is no coverage because COVID-19 did not cause a tangible alteration of the insured properties.
I
In March of 2020, in response to the public health crisis caused by the spread of COVID-19, Florida’s Governor issued a series of executive orders restricting on-premises operations of non-essential businesses, including restaurants, bars, and retail stores. Several counties in Florida issued their own emergency stay-at-home or shelter-in-place orders, echoing the restrictions implemented by the Governor. These orders immediately impacted businesses throughout the state; many were forced to close their doors, and some never reopened.
All over the country, affected businesses submitted claims under their all-risk insurance policies with the hope of recovering
Eaсh of the insureds seeks coverage under an all-risk insurance policy that provides compensation for losses and expenses incurred in connection with “direct physical loss of or damage to” the covered property or “direct physical loss or damage to” the covered property. Before getting to the merits of the appeals, we set out the particulars of the underlying actions and the coverage provisions at issue on appeal.1
A
SA Palm Beach operated a fine-dining restaurant in Palm Beach, Florida. See SA Palm Beach Amended Complaint at ¶ 16. Like many other similar establishments, it was subject to state and local closure orders. See id. at ¶ 34.
Certain Underwriters at Lloyd’s, London, issued a commercial property insurance policy to SA Palm Beach. The policy providеs in relevant part that Lloyd’s will “pay for direct physical loss
In its complaint, SA Palm Beach asserted that its policy provides “business interruption coverage” which “would indemnify [it] for lost income and profits in the event that its business was shut down.” See SA Palm Beach Amended Complaint at ¶ 37. Specifically, SA Palm Beach invoked coverage under the Business Income and Extra Expense provisions of the policy. The relevant language of those provisions is as follows.
Business Income: “We will pаy for the actual loss of Business Income you sustain due to the necessary ‘suspension’ of your ‘operations’ during the ‘period of restoration.’ The ‘suspension’ must be caused by direct physical loss of or damage to property at [the insured] premises[.]”
Extra Expense: “Extra Expense means necessary expenses you incur during the ‘period of restoration’ that you would not have incurred if there had been no direct physical loss or damage to property caused by or resulting from a Covered Cause of Loss.”
SA Palm Beach Policy at 60 (emphases added).
a. Begins:
(1) 72 hours after the time of direct physical loss or damage for Business Income coverage; or
(2) Immediately after the time of direct physical loss or damage for Extra Expense coverage;
caused by or resulting from any Covered Cause of Loss at the [insured] premises; and
b. Ends on the earlier of:
(1) The date when the property at the [insured] premises should be repaired, rebuilt or replaced with reasonable speed and similar quality; or
(2) The date when business is resumed at a new permanent location.
Id. at 68 (emphases added).
SA Palm Beach alleged that—in abiding by the closure orders—it suffered “a direct physical loss of [its] property because [it was] unable to use the[ ] property for its intended purpose.” SA Palm Beach Amended Complaint at ¶ 44. It further claimed that it suffered direct physical loss “in the form of diminished value,
Lloyd’s moved for dismissal under
SA Palm Beach responded that it had plausibly alleged direct physical loss because the closure orders “rendered the property non-functional or only partially functional as it was no longer suitable for its intended purpоse of ‘physical’ sit-down, fine dining.” It also asserted that the policy’s use of the disjunctive “or”—rather than a conjunctive connector—in the phrase “direct physical loss of or damage to” demonstrated that loss must mean something different than damage.
The district court granted the motion to dismiss. Relying in part on our unpublished decision in Mama Jo’s Inc. v. Sparta Insurance Co., 823 F. App’x 868, 879 (11th Cir. 2020) (holding that under Florida law “an item or structure that merely needs to be cleaned has not suffered a ‘loss’ which is both ‘direct’ and ‘physical’”), the
B
Emerald Coast operated a sports bar and restaurant in Destin, Florida. See Emerald Coast Amended Complaint at ¶ 15. Like SA Palm Beach, it was subject to state and local closure orders issued during the COVID-19 pandemic. See id. at ¶¶ 65–72.
Aspen Specialty Insurance issued a commercial property insurance policy to Emerald Coast, and this policy includes Business Income, Extra Expense, and Extended Business Income provisions. The Business Income and Extra Expense provisions in Emerald Coast’s policy are identical to those in SA Palm Beach’s policy, so we do not repeat their language here. In summary, hоwever, these two provisions provide coverage for the necessary suspension of operations during the “period of restoration” if the suspension is caused by “direct physical loss of or damage to” property at the insured premises. See Emerald Coast Policy, D.E. 7-1, at 60 (emphasis added). The policy also contains an Extended Business Income provision, which reads as follows:
Extended Business Income: “If the necessary ‘suspension’ of your ‘operations’ produces a Business Income loss payable under this policy, we will pay for the actual loss of Business Income you incur during the period that: (a) Begins on the date property . . . is actually repaired, rebuilt or replaced and ‘operations’ are resumed; and (b) Ends on the earlier of: (i) The date you could restore your ‘operations’, with reasonable speed, to the level which would generate the business income amount that would have existed if no direct physical loss or damage had occurred; or (ii) 60 consecutive days after the date determined in . . . (a) above. . . . Loss of Business Income must be caused by direct physical loss or damage at the [insured] premises caused by or resulting from any Covered Cause of Loss.”
Id. at 62 (emphases added). The policy does not define the phrases “direct physical loss of or damage to” property or “direct physical loss or damage.”
Finally, the policy provides additional coverage—outlined in a special form—for losses associated with spoilage. The Spoilage provision insures against “Covered Causes of Loss” of “perishable stock at the [insured] premises . . . that is in [the insured’s] care, custody or control.” The “Covered Causes of Loss” include:
(a) Breakdown or Contamination by: (1) Change in temperature or humidity resulting from mechanical breakdown or failure of refrigerating, cooling
or humidity control apparatus or equipment . . . ; and (2) Contamination by the refrigerant. (b) Power Outage, meaning a change in temperature or humidity resulting from complete or partial interruption of electrical power . . . due to conditions beyond [the insured’s] control.”
Id. at 9–10.
Emerald Coast alleged that the “presence of any COVID-19 particles on physical property impair[ed] its value, usefulness and/or normal function.” Emerald Coast Amended Complaint at ¶ 56. It tied the alleged “direct physical loss” to the closure orders, noting that they “prohibited access to and use of ” the property “in response to dangerous physical conditions” caused by COVID-19. See id. at ¶ 82.
Aspen filed a
The district court agreed with Aspen and granted its motion to dismiss. It held that the triggering language in the Business Income, Extra Expense, and Extended Business Income provisions “clearly and unambiguously require[d] actual physical damage to the property.”2
C
Rococo Steak, LLC, operated a steakhouse in St. Petersburg, Florida. See Rococo Complaint at ¶ 1. It too was subject to state and local closure orders issued as a result of the COVID-19 pandemic. See id. at ¶¶ 40–42.3
Aspen Specialty Insurance issued a commercial property insurance policy to Rococo. The policy contains Business Income and Extra Expense provisions, which are identical to those in the
In its complaint, Rococo alleged that it was “forced to suspend business operations . . . as a result of damage sustained due to the COVID-19 pandemic.” See Rococo Complaint at ¶ 9 (emphasis added). Specifically, Rococo claimed that:
The presence of COVID-19 caused direct physical loss of and/оr damage to the covered premises under the Policy by, among other things, damaging the property, denying access to the property, preventing customers from physically occupying the property, causing the property to be physically uninhabitable by customers, causing its function to be nearly eliminated or destroyed, and/or causing a suspension of business operations on the premises.
Id. at ¶ 44 (emphases added). Rococo further asserted that “[r]elated actions of civil authorities also prohibited access to and occupancy/operation of the Restaurant, as a result of damage sustained due to the COVID-19 pandemic.” Id. at ¶ 9 (emphasis added). Rococo added that the actions taken by civil authorities
Aspen moved to dismiss under
In response, Rococo argued that it had sufficiently alleged “direct physical loss of or damage to” the premises caused by COVID-19 because, contrary to Aspen’s contention, that phrase does not require structural alteration of the premises. Rococo also asserted in the alternative that viruses like COVID-19 “infest property and stick to its surfaces” and such infestation does cause the kind of structural alteration that comes within the purview of the term “direct physical loss of or damage to” the covered premises. Finally, Rococo maintained that the impairment of functionality and habitability of the restaurant demonstrated that the property had sustained direct physical loss or damage.
The district court granted Aspen’s motion to dismiss. Citing our decision in Mama Jo’s, 823 F. App’x at 879, it held that Rococo failed to allege the kind of tangible damage required to provide coverage for “direct physical loss of or damage to” property. The court likened COVID-19, which was at the heart of Rococo’s claims, to the dust and debris in Mama Jo’s and quoted that decision for the
D
Rooms-To-Go (“RTG”) is a furniture retailer operating more than 150 stores in several states. Its principal place of business is in Seffner, Florida. See RTG Complaint at ¶ 2, 7. RTG, like many businesses, was subject to state and local closure orders and sustained financial losses during the COVID-19 pandemic. See id. at ¶ 42–50.
Given the nature of its operations, RTG secured 14 commercial property insurance policies in the form of an insurance tower, which spreads the risk across multiple insurers. The insurers included Aspen Specialty Insurance, Crum & Forster Specialty Insurance, Evanston Insurance, Everest Indemnity Insurance, Hallmark Specialty Insurance, Homeland Insurance, Maxum Indemnity, and Ironshore Specialty Insurance. The relevant terms in each of the policies RTG obtained are substantively the same.
All of the policies contain Business Interruption, Extra Expense, Contingent Business Interruption, Civil Authority, Ingress/Egress, and Loss Adjustment Expenses provisions. See id. at ¶ 68. With the exception of the Loss Adjustment Expenses provision, all of these provisions refer to the “Perils Insured Against” clause in the policy to determine whether coverage exists. See RTG
This policy Insures against all risks of direct physical loss of or damage to property described herein including general average, salvage, and all other charges on shipments covered hereunder; except as hereafter excluded.
Id. at 24 (emphasis added).
The Loss Adjustment Expenses provision reads:
This policy is extended to include expenses incurred by the Insured, or by the Insured‘s representatives for preparing and certifying details of a claim resulting from a loss which would be payable under this policy. These expenses include fees of professionals engaged to assist the Insured in determining the cause and origin оf the loss, the amount of loss sustained, and the amount of loss payable under this policy. This policy shall not cover the expenses of a public adjuster and cost of attorneys.
Id. at 31 (emphasis added). RTG does not contend that this provision—though missing the exact triggering language included in the other provisions—should be analyzed under a different framework. The common interpretative fight, RTG seems to contend, is over what constitutes a “direct physical loss of or damage to” property.
In addition tо alleging loss of use, RTG also asserted that COVID-19 itself damaged its properties. Though it did not articulate a “damage theory” in its complaint, RTG alleged—in contrast to its assertion that the closure orders constituted a covered peril under the policies—that the “presence of coronavirus particles” which were “detectable on various types of surfaces” caused “direct physical damage” to its properties. See id. at ¶ 30, 33.
Invoking
RTG responded that the closure orders did in fact cause a loss of use of the property within the meaning of the coverage provisions. It also noted that it had expressly alleged the presence of COVID-19 on its properties, which would constitute direct physical loss of or damage triggering coverage under the policy.
The district court was unpersuaded by RTG’s arguments and granted the insurers’ motion to dismiss. Adopting much of the reasoning of Infinity Exhibits, Inc. v. Certain Underwriters at Lloyd’s London Known as Syndicate PEM 4000, 489 F. Supp. 3d 1303 (M.D. Fla. 2020), the court concluded that economic losses
II
In these cases, which are premised on diversity jurisdiction, we must decide whether the district courts correctly forecast and applied Florida law in dismissing the insureds’ complaints. Our review is therefоre plenary. See Salve Regina Coll. v. Russell, 499 U.S. 225, 231 (1991) (“[A] court of appeals should review de novo a district court’s determination of state law.”); Ellis v. Cartoon Network, Inc., 803 F.3d 1251, 1255 (11th Cir. 2015) (“We review the district court’s dismissal of [the] amended complaint under Rule 12(b)(6) de novo[.]”).
“To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted). A claim is facially plausible if the plaintiff “pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. The plausibility standard, however, “is not akin to a ‘probability requirement.’” Id. (citation omitted).
Under Florida law, an insurance policy should be read “as a whole, endeavoring to give every provision its full meaning and operative effect.” U.S. Fire Ins. Co. v. J.S.U.B., Inc., 979 So. 2d 871, 877 (Fla. 2007) (citation omitted). If the relevant language is plain and unambiguous, it is interpreted as written. See State Farm Mut. Auto. Ins. Co. v. Menendez, 70 So. 3d 566, 569–70 (Fla. 2011). But if there is an ambiguity, it is construed against the insurer and in favor of coverage. See J.S.U.B., 979 So. 2d at 877.
Language is not ambiguous merely because the policy fails to define a term, or because the parties disagree about its meaning. See Swire Pac. Holdings, Inc. v. Zurich Ins. Co., 845 So. 2d 161, 166 (Fla. 2003). A policy is ambiguous only when “its terms make the contract susceptible to different reasonable interpretations, one resulting in coverage and one resulting in exclusion.” Gulf Tampa Drydock Co. v. Great Atl. Ins. Co., 757 F.2d 1172, 1174–75 (11th Cir. 1985) (applying Florida law).
As the Florida Supreme Court has explained, an “all-risk policy” does not extend coverage to “every conceivable loss.” Sebo v. Am. Home Assurance Co., Inc., 208 So. 3d 694, 696–97 (Fla. 2016) (citation omitted). As a result, “[a]n insured claiming under an all-risk[ ] policy has the burden of proving that the insured property suffered a loss while the policy was in effect.” Empire Pro Restoration, Inc. v. Citizens Prop. Ins. Corp., 322 So. 3d 96, 98 (Fla. 4th DCA 2021) (internal quotation marks and citation omitted). See generally Andrеw B. Downs & Linda M. Bolduan, 4 Law and Prac.
A
SA Palm Beach, Emerald Coast, and Rococo seek coverage under the Business Income and Extra Expense provisions of their respective policies. Emerald Coast additionally seeks coverage under the Extended Business Income provision of its policy. RTG seeks coverage under the Business Interruption, Extra Expense, Contingent Business Interruption, Civil Authority, Ingress/Egress, and Loss Adjustment Expenses provisions of its policy.
All but one of the provisions referenced above expressly require (on their own or by reference to other policy provisions) that there be “direct physical loss of or damage to” property or “direct physical loss or damage” to property. The one exception is thе Loss Adjustment Expenses provision of RTG‘s policy. But because RTG does not present any distinct arguments about that provision, we consider it together with the other provisions in its policy.
There are no Florida decisions interpreting an all-risk commercial insurance policy providing coverage for “direct physical loss of or damage to” property or “direct physical loss or damage to” property in the context of the COVID-19 pandemic. We have
We therefore “consider whatever might lend [us] insight, including relevant state precedents, analogous decisions, considered dicta, scholarly works, and any other reliable data tending convincingly to show how the [Florida Supreme Court] would decide the issue at hand.” Guideone Elite Ins. Co. v. Old Cutler Presbyterian Church, Inc., 420 F.3d 1317, 1326 n.5 (11th Cir. 2005) (internal quotation marks and citation omitted). For the reasons which follow,
B
Although there are many different approaches by which federal courts predict state law, see Michael C. Dorf, Prediction and the Rule of Law, 42 UCLA L. Rev. 651, 696-715 (1995), some of our cases employ a presumption to forecast how state courts would decide an unsettled issue. We “presume that [state] courts would adopt the majority view on a legal issue in the absence of indications to the contrary.” Bobo v. Tenn. Valley Auth., 855 F.3d 1294, 1304 (11th Cir. 2017) (using this presumption to determine Alabama law). See also Wammock v. Celotex Corp., 835 F.2d 818, 820 (11th Cir. 1988) (using this presumption to determine Georgia law); Hensley v. E.R. Carpenter Co., 633 F.2d 1106, 1109 (5th Cir. Unit A 1980) (using this presumption to determine Mississippi law).5
The majority view, as set out in a leading insurance treatise, is that a phrase like “physical loss of or damage tо” requires a tangible alteration to the covered property:
The requirement that the loss be “physical,” given the ordinary definition of that term, is widely held to exclude alleged losses that are intangible or incorporeal and, thereby, to preclude any claim against the property insurer when the insured merely suffers a detrimental economic impact unaccompanied by a distinct, demonstrable, physical alteration of the property.
Steven Plitt et al., 10A Couch on Insurance § 148:46 (3rd ed. & Dec. 2021 update) (footnotes omitted).
As far as we can tell, every federal and state appellate court that has decided the meaning of “physical loss of or damage to” property (or similar language) in the context of the COVID-19 pandemic has come to the same conclusion and held that some tangible alteration of the property is required. There is therefore no coverage for loss of use based on intangible and incorporeal harm to the property due to COVID-19 and the closure orders that were issued by state and local authorities even though the property was rendered temporarily unsuitable for its intended use. See Uncork & Create LLC v. Cincinnati Ins. Co., 27 F.4th 926, 930-34 (4th Cir. 2022) (West Virginia law); Q Clothier New Orleans, LLC v. Twin City Fire Ins. Co., 29 F.4th 252, 257-61 (5th Cir. 2022) (Louisiana law); Terry Black‘s Barbecue, LLC v. State Auto. Mut. Ins. Co., 22 F.4th 450, 455-59 (5th Cir. 2022) (Texas law); Brown Jug, Inc. v. Cincinnati Ins. Co., 27 F.4th 398, 402-05 (6th Cir. 2022) (Michigan law); Estes v. Cincinnati Ins. Co., 23 F.4th 695, 699-702 (6th Cir. 2022) (Kentucky law); East Coast Ent. of Durham, LLC v. Houston Cas. Co., ___ F.4th ___, 2022 WL 1086377, at *2-*3 (7th Cir. Apr. 12, 2022) (Illinois law); Monday Rest. LLC v. Intrepid Ins. Co., ___ F.4th ___, 2022 WL 1194000, at *1-*2 (8th Cir. Apr. 26, 2022) (Missouri law); 10012 Holdings, Inc. v. Sentinel Ins. Co., Ltd., 21 F.4th 216, 220-23 (2d Cir. 2021) (New York law); Santo‘s Italian Cafe LLC v. Acuity Ins. Co., 15 F.4th 398, 400-06 (6th Cir. 2021) (Ohio law); Sandy Point Dental, P.C. v. Cincinnati Ins. Co., 20 F.4th 327, 334-37 (7th Cir. 2021) (Illinois law); Crescent Plaza Hotel Owner, L.P. v. Zurich Am. Ins. Co., 20 F.4th 303, 308 (7th Cir. 2021) (Illinois law); Oral Surgeons, P.C. v. Cincinnati Ins. Co., 2 F.4th 1141, 1144-45 (8th Cir. 2021) (Iowa law); Mudpie, Inc. v. Travelers Cas. Ins. Co. of Am., 15 F.4th 885, 891-93 (9th Cir. 2021) (California law); Goodwill Indus. v. Phil. Indem. Ins. Co., 21 F.4th 704, 710-12 (10th Cir. 2021) (Oklahoma law); Gilreath Fam. & Cosmetic Dentistry, Inc. v. Cincinnati Ins. Co., 2021 WL 3870697, at *2 (11th Cir. Aug. 31, 2021) (Georgia law); Wakonda Club v. Selective Ins. Co. of Am., ___ N.W.2d ___, 2022 WL 1194012, at *3-*7 (Iowa Apr. 22, 2022) (Iowa law); Verveine Corp. v. Strathmore Ins. Co., ___ N.E.3d ___, 2022 WL 1180061, at *5-*7 (Mass. Apr. 21, 2022) (Massachusetts law); Ind. Repertory Theatre v. Cincinnati Cas. Co., 180 N.E.3d 403, 408-11 (Ind. Ct. App. 2022) (Indiana law); Sweet Bеrry Cafe, Inc. v. Society Ins., Inc., ___ N.E.3d ___, 2022 WL 780847, at *6-*11 (Ill. App. Ct. Mar. 15, 2022) (Illinois law); Gavrilides Mgmt. Co., LLC v. Mich. Ins. Co., ___ N.W.2d ___, 2022 WL 301555, at *4-*6 (Mich. Ct. App. Feb. 1, 2022) (Michigan law); Sanzo Ent., LLC v. Erie Ins. Exch., 182 N.E.3d 393, 401-06 (Ohio Ct. App. 2021)
There are no indications suggesting that the Florida Supreme Court would reject the majority view. We therefore presume that Florida would adopt the majority position. See Bobo, 855 F.3d at 1304.
C
As an independent matter, we conclude that the majority position is legally sound under Florida law. Indeed, the two Florida cases that shed some light on the phrase “physical loss of or damage to” property—Homeowners Choice Prop. & Cas. v. Maspons, 211 So. 3d 1067 (Fla. 3d DCA 2017), and Azalea, Ltd. v. Am. States Ins. Co., 656 So. 2d 600 (Fla. 1st DCA 1995)—are consistent with the majority position (or at the very least not inconsistent with that position).
In Maspons, the insurer appealed a trial court order holding it responsible for the cost of tearing out and replacing a concrete slab to make a repair on a broken drain pipe in the insureds’ home. See id. at 1068. The policy insured against “risk of direct loss to property . . . only if that loss is a physical loss to property.” Id. at 1069 (emphasis omitted). The Third District, relying on Black‘s Law Dictionary, explained that “[a] “loss” is the diminution of value of something, and in this case, the “something” is the insureds’ . . . property. “Direct” and “physical” modify loss and impose the requirement that the damage be actual.” Id. at 1069 (citation omitted).7
Though it ultimately ruled in favor of the insurer based on other language in the policy, the Third District held in Maspons that the “failure of the drain pipe to perform its function
Though the language in Maspons came from a homeowner‘s policy rather than a commercial insurance policy and is not identical to the language in the policies before us, it is sufficiently similar to make that case informative. See id. at 1068. And because Maspons explains that direct and physical loss requires that damage be actual, see id. at 1069, it does not help the insureds here. Moreover, Maspons involved tangible harm to the covered property, i.e., a physical break in the drain pipe, and such harm is missing here. See also Vazquez v. Citizens Prop. Ins. Corp., 304 So. 3d 1280, 1284-85 (Fla. 3d DCA 2020) (applying Maspons in a case where water intrusion damaged some ceramic tiles and a kitchen cabinet in the insured‘s home).
In Azalea, the insured operated a mobile home park with its own sewage treatment facility on site. See id. at 600. Vandals dumped an unknown substance into the sewage treatment facility, causing the destruction of a bacteria colony that was an integral part of the sewage treatment process. See id. at 601. The insured then sought to recover under a provision in its commercial insurance policy for “dirеct physical loss of or damage to” property at the covered premises. See id. at 600-01.
The trial court ruled in favor of the insurer, but the First District reversed. The “bacteria colony [was] an integral part of the
Azalea, which aligns with the majority view, also does little to help the insureds here. See id. That is because Azalea, like Maspons, dealt with tangible harm to the covered property, i.e., the destruction of the bacteria colony which had physically become part of the sewage treatment facility. See id.
Our unpublished decision in Mama Jo‘s, which involved the application of Florida law, also cuts against the insureds’ argument that “direct physical loss of or damage to” property does not require actual, tangible, structural, or concrete harm to property but merely demands that the property no longer be suitable for its intended use. See 823 F. App‘x at 878-79. In Mama Jo‘s, dust and debris from a nearby road construction project migrated into the insured‘s restaurant. The restaurant stayed open during the construction project, and staff performed daily cleaning, but customer traffic decreased. See id. at 871-72. The insured made two claims under its commercial all-risk policy—one for cleaning and painting
Applying Florida law, and relying on Maspons, we held that the district court had correctly granted summary judgment to the insurer on both claims. See id. at 878-79. With respect to the cleaning and painting claim, we said that “under Florida law, an item or structure that merely needs to be cleaned has not suffered a “loss” which is both “direct” and “physical.“” Id. at 879 (citing Maspons, 211 So. 3d at 1069). As for the lost income claim, the insured did not “put forward any . . . evidencе that it suffered a direct physical loss of or damage to its property during the policy period.” Id.
We conclude that Mama Jo‘s provides a correct statement of Florida law in accord with the majority view and therefore find it persuasive. Like the dust and debris in Mama Jo‘s, COVID-19 did not cause any material alteration of the insureds’ properties. See id. It did require that the properties be cleaned to eliminate the particles of the virus, but as Mama Jo‘s explains, that does not constitute a “physical loss of or damage to” the properties. See id.
D
The Business Income, Business Interruption, and/or Extra Expense provisions of the SA Palm Beach, Emerald Coast, Rococo,
Here‘s how the Fourth Circuit put it in a similar case:
The need to repair, rebuild, replace, or expend time securing a new, permanent property is a pre-condition for coverage of lost business income and other expenses. Any alternative meaning of the terms “physical loss” or “physical damage” that does not require a material alteration to the property would render meaningless this pre-condition to coverage for business income loss. [ . . . ] Here, neither the closure order nor the COVID-19 virus caused present or impending material destruction or material harm that physically altered the covered property requiring repairs or replacement so that they could be used as intended. Thus, . . . the policy‘s coverage for business income loss and other expenses does not apply to [an insured‘s] claim for financial losses in the absence of any material destruction or material harm to its covered premises.
E
RTG and Rococo also argue that their complaints alleged that COVID-19 itself actually damaged their properties. RTG alleged that “the presence of coronavirus particles caused . . . direct physical damage” to its property. See RTG Complaint at ¶ 33. Rococo alleged more generally that the “presence of COVID-19 caused direct physical . . . damage to the covered premises” and “damage[ed] the property.” See Rococo Complaint at ¶ 44. Because they affirmatively pled that COVID-19 damaged their properties, RTG and Rococo maintain that—even under the majority view—their claims should survive a motion to dismiss.
For its part, RTG did in fact assert that COVID-19 damaged its property, but it also set out more specific details concerning this general claim. It allegеd that “coronavirus particles” caused the damage, and that those particles were “detectable on various types of surfaces.” RTG Complaint at ¶ 30, 33. These specific allegations of what the “physical damage” consisted of govern over the general
We know from Mama Jo‘s, which we find persuasive, that under Florida law “an item or structure that merely needs to be cleaned has not suffered a “loss” which is both “direct” and “physical.“” 823 F. App‘x at 879. In other words, surfaces not tangibly altered or harmed can be cleaned without requiring repair. RTG‘s need to clean or disinfect storеs to get rid of COVID-19 does not constitute direct physical loss or damage under Florida law.
In its brief, Rococo argues that “the particles of COVID-19 structurally alter property surfaces and ambient air in a manner that causes loss and damage by rendering affected premises dangerous to human health.” Rococo Br. at 31. But this allegation appears nowhere in its complaint. In fact, the complaint does not even distinguish between loss and damage, and instead generally alleges that COVID-19 “caused direct physical loss of and/or damage to the covered premises” without providing any details. See Rococo Complaint at ¶ 44. A plaintiff must “provide the grounds of his entitlement to relief” in order to give the defendant fair notice of its claim, see Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotation marks omitted and alteration adopted), and here wе do not think that Rococo‘s bare allegation that COVID-19 caused direct physical damage fulfills this obligation.
We now turn to one claim based on a policy provision which does not contain the language “direct physical loss of or damage to” property or “direct physical loss or damage to” property. That claim is the Spoilage provision claim made by Emerald Coast.
As the parties correctly note, the district court did not address this claim in its order of dismissal. We believe the best course of action is to remand the case so that the district court can decide, in the first instance, whether this claim survives Aspen‘s motion to dismiss. See, e.g., F.D.I.C. v. N. Savannah Props., LLC, 686 F.3d 1254, 1261 (11th Cir. 2012). We therefore vacate in part the dismissal of Emerald Coast‘s complaint and send the case back for a ruling on the claim under the Spoilage provision.
V
We affirm the dismissal of the complaints filed by SA Palm Beach, Rococo, and RTG. We affirm in part and vacate in part the dismissal of the complaint filed by Emerald Coast, and remand that case for further proceedings consistent with this opinion.
AFFIRMED IN CASE NOs. 20-14812, 21-10672, & 21-10490; AFFIRMED IN PART AND VACATED IN PART IN CASE NO. 21-10190.