Carlton Fields

Judge Raag Singhal in the U.S. District Court for the Southern District of Florida recently dismissed with prejudice a COVID-19 business interruption insurance coverage lawsuit brought by the owners of Anthony’s Runway 84 – a popular restaurant near the Fort Lauderdale airport. As this blog has reported previously, there has been a tidal wave of rulings in favor of insurers in COVID-19 business interruption insurance coverage lawsuits. With Judge Singhal’s dismissal with prejudice in Runway 84, Inc. v. Certain Underwriters at Lloyd’s, London, there are now at least 36 decisions applying Florida law and granting insurers’ motions to dismiss, motions for judgment on the pleadings, or motions for summary judgment in COVID-19 business interruption insurance coverage cases.

Plaintiffs’ Claimed Losses and Policy

In Runway 84, the policyholder-plaintiffs alleged that COVID-19 was present at their restaurant and caused “direct physical loss and resultant/ensuing damages” to the restaurant property. The plaintiffs further alleged that the presence of COVID-19 caused them to temporarily close their restaurant and sustain related financial losses.

The plaintiffs sought coverage for their financial losses under the business income coverage provision in their commercial property insurance policy issued by certain underwriters at Lloyd’s, London. However, the policy’s business income coverage provision only provided coverage for financial losses resulting from a suspension of the plaintiffs’ operations if the suspension was caused by “direct physical loss of or damage to” property at the plaintiffs’ restaurant.

Court Holds COVID-19 Does Not Cause Direct Physical Loss or Damage

Judge Singhal held that the plaintiffs failed to state a claim for coverage because, as a matter of law, the plaintiffs could not establish any direct physical loss of or damage to property. Judge Singhal made this ruling even though the plaintiffs alleged that the “presence of COVID-19, whether on a surface or in the air, or being carried by an infected host, renders physical and personal property unsafe and impairs the value, usefulness, or function of said property resulting in direct physical loss or damage to that property.” Judge Singhal explained, “This is a conclusory statement that does not plausibly establish physical loss or damage as defined by Florida law.” He continued:

There is no actual change in the insured property alleged; at most, the Complaint alleges that COVID-19 particles … have spread through the premises. Numerous courts, including this Court, have held that the presence of COVID-19 on premises does not constitute direct physical loss or damage.

Court Rejects Government Order’s Assertion That COVID-19 Causes Property Damage

The plaintiffs attempted to support their contention that their restaurant suffered direct physical loss or damage by pointing to a COVID-19-related closure order from the Broward County government, which stated that “the [corona]virus is physically causing property damage due to its proclivity to attach to surfaces for prolonged periods of time.” Judge Singhal rejected the plaintiffs’ efforts, stating: “This is not a statement of Florida insurance law, is not a judicial or administrative finding, and is not binding on this Court. Even if COVID-19 were present at the restaurant, this would not constitute physical damage sufficient to trigger coverage.”

Court Rejects Plaintiffs’ Loss of Use Argument

Judge Singhal also rejected the plaintiffs’ argument that their restaurant sustained direct physical loss or damage because “the presence of COVID-19 made the property unsuitable for its intended purposes.” Judge Singhal explained:

[U]nder Florida law, loss of use of property for its intended purposes does not constitute direct physical loss. While Plaintiff argues that a loss of functionality of, access to, or intended use of the [property] constitutes physical loss or damage, it is not supported by the plain language of the Policy or Florida law.