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Expert testimony does not establish the existence of direct physical loss



I Mama Jo & # 39 ;s Inc., d.b.a. Berries v. Sparta Insurance Company, No. 18-12887, U.S. Court of Appeal for the Eleventh Circuit (August 18, 2020) The Eleventh Circuit was asked to determine whether the district court correctly excluded the opinions of the plaintiff's experts and granted the defendant's request for summary judgment based on the conclusion that the plaintiff could not establish that it suffered a direct physical loss that would trigger coverage.

BACKGROUND

Mama Jo & # 39 ;s Inc. d / b / a Berries ("Berries") owns and operates a restaurant in Miami, FL 33133. The restaurant is less than a mile from the ocean and is partially enclosed by a retractable awning, wall and ceiling system. When the system is opened, the interior areas of the restaurant are exposed to the elements. The restaurant's front entrance, bar and seating are adjacent to SW 27th Avenue.

Road construction

From December 2013 to June 2015, there was road construction in various places in the restaurant's general vicinity. During that time, dust and debris generated by the construction migrated to the restaurant. Berries performed daily cleaning with their normal cleaning methods and used dust pans, hoses, rags, towels and fans.

Berries were open every day throughout the road work. Although the restaurant retained the ability to serve the same number of customers as before construction began, customer traffic decreased during roadworks.

Insurance Policy

From 19 September 2013 to 19 September 2014, Berries was insured by Sparta Insurance Company (“Sparta”). Sparta issued an “all risk” commercial property insurance policy, which in the relevant part contained a coverage form for buildings and personal properties and a coverage form for business income (and additional costs). The building and personal property form covered by the policy covers “direct physical loss of or damage to covered property. . . caused by or caused by any covered cause of loss. The policy defines "Covered causes of loss" as "Risks of direct physical loss unless the loss is" excluded or limited.

The policy form of business income coverage (and additional costs) stipulates that Sparta shall pay for "the actual loss of Business Income you maintain due to the necessary" suspension "of your" business "during the" recovery period. ". The policy provides that" ". the suspension "must be caused by direct physical loss of or damage to" covered property. [19659006] On December 12, 2014, Berries filed a claim with Sparta under the policy. Bär claimed that the claim was related to dust and debris generated by the roadway. Sparta awarded Corey Buford, an insurance adjuster, to review the claim on behalf of Sparta, Berries hired a public adjuster, Robert Inguanzo of Epic Group Public Adjusters, to help with his claim.

In April 2015, Inguanzo Buford sent a "sworn statement in evidence" for loss "for the building claim, including a preliminary estimate of the damage in the amount of $ 13,775.58. (This amount was calculated in from the estimated amount – $ 16,235.58 – minus a deductible. Inguanzo also sent Buford a "Sworn Statement in Proof of Loss" and supporting documentation regarding a company's income claim in the amount of $ 292,550.84. Berries claimed that Sales in 2014 were lower than expected compared to the sales rate in previous years.

On January 30, 2017, Sparta denied the claim because it "was not covered by the [] policy." As Sparta explained: “[w] with respect to building coverage, … Evidence of loss form does not reflect the existence of any physical damage. It can also be questioned whether a direct physical loss occurred. "

Disputes and presentation of a new claim for damages

Berries sued. In his first revelations in the lawsuit, Berries claimed the same damages as it had before the lawsuit was filed: $ 16,275.58 for cleaning and painting the restaurant and 292 $ 550504 for lower-than-expected sales in 2014. Bär later served amended answers to questioning, in which it identified for the first time new categories of damages totaling $ 319,688.57. Bär claimed that the recently claimed damages were due to the replacement of the restaurant's awning and retractable roof systems, plumbing repairs and replacement of the restaurant's sound and lighting system.

Berries experts

Berry relied on three experts as the cause of its recent alleged damage to construction dust and debris generated more than two and a half years earlier, ie during Sparta's policy period which ended on 19 September 2014.

The District Court ruled that Berries & # 39; original claim for cleaning was not covered because property that needs to be cleaned but not damaged has not suffered a "direct physical loss". The district court also concluded that direct physical loss relates to material damage to property, which makes it unsatisfactory for future use or requires repairs. Finally, the district court ruled that Berries' lower-than-expected claims in 2014 were not covered, as Berries could not establish that it was suffering from a "necessary" suspension of its "business" as a result of a "direct physical loss.

ANALYSIS

In Daubert the Supreme Court declared that the courts of law must act as "gatekeepers" and have the task of examining speculative, unreliable expert testimonies. In this important role, courts of law may consider a non-exhaustive list of factors including: (1) whether the expert's theory can be and has been tested; (2) whether the theory has undergone peer review and publication; (3) the known or potential error rate of the technology; and (4) whether the technology is widely accepted in the scientific community.

Even experienced experts must explain how that experience leads to the conclusion reached, why that experience is a sufficient basis for the opinion and how this experience is reliably applied to facts.

Berry offered Brizuela as a subject matter and origin expert. He referred to the source or origin of the damage to the restaurant. Brizuela stated that "[i] it is obvious that the source of the damage originated from the nearby road building on site [279909018] [A] in front of the property." To reach this conclusion, he carried out a visual inspection of the restaurant, again over two years after the road construction was completed. He did not perform any sampling or testing of dust and sediment that he found at the time. His "method" was simply observation and a review of photographs.

The district court correctly excluded the expert opinions that were offered and this inevitably led to the summary judgment turning.

Berry failed to show any "direct physical loss or damage"

Under Florida law, the interpretation of an insurance contract, including the resolution of any ambiguities, is a matter for the court to decide.

berries the public adjuster Inguanzo testified that "cleaning and painting" was all that was required.He also testified that there was no need to remove or replace objects at that time.Based on this testimony, the district court ruled that Berries had not been able to state that they had suffered a "direct physical loss" as the term is defined in Florida law.

As for the claim for loss of business income, corporate income coverage requires that a "suspension" of business "be caused by direct physical loss of or damage Again, even though Berries had shown a "suspension" of the business, Berries did not provide any evidence that they suffered a direct t physical loss of or damage to his property during the insurance period. Therefore, the district court's introduction of a summary judgment on Berries' loss of business income claims was also correct. Berry failed to show that it suffered a "direct physical loss."

Berry did not establish that it was affected by a covered shutdown of the business. you maintain due to the necessary "suspension" of your "business" during the "restoration period." "Conceivably, a slowdown caused by closing parts of the restaurant for cleaning would be attributed to a" period of restoration. "But even if Berries is right that the district court erred in this part of the analysis, Sparta was still entitled to a summary judgment on the business income claim, as any '' suspension 'must be caused by direct physical loss of or damage to property."

This case establishes that any claim to the insurer for property damage or loss of income requires the insured to establish the existence of direct physical loss on the property, whose risk of loss was insured.Bears, and its less than sufficient experts, failed to establish direct physical loss – only those who needed to clean dust from the premises.Those seeking compensation due to the compulsory suspension of Covid-19 should note that they will have similar difficulties in determining the occurrence of direct physical loss.


© 2020 – Barry Zalma [19659006] Barry Zalma, Esq., CFE, now limits his practice to working as an insurance consultant specializing in on insurance coverage, handling of insurance claims, fraud and insurance fraud almost equally for insurers and policyholders. He also acts as an arbitrator or mediator for insurance-related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims lawyer and more than 52 years in the insurance industry. He is available at http://www.zalma.com and zalma@zalma.com.

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