A restaurant in South Florida has asked the U.S. Supreme Court to overturn a federal district court ruling that the restaurant is not entitled to coverage under a "risk-risk" commercial property insurance policy for lost revenue and additional expenses due to nearby road construction. In the underlying coverage measure, the policyholder, Mama Jo & # 39 ;s (like Berries in the Grove), sought coverage according to its all-risk policy for corporate income losses and costs caused by construction dust and debris that migrated into the restaurant. Should the Supreme Court grant certiorari the matter will be closely monitored by insurers and policyholders as an indicator of the extent of coverage available in all risk policies and whether the principles are relevant to construction dust and debris (in the case of Mama Jo's claims) has some application to the thousands of ongoing claims for COVID-1
As previously discussed on this blog, the eleventh district's decision deviates from Florida's precedent on the issue of "direct physical loss" and even its own understanding of the term described in the August 18, 2020 decision now in the Supreme Court. Mama Jo points to this in the petition together with several other errors which, for example, argue that the appellant's decision means that entire coverage areas are non-existent by demanding "concrete destruction" of property according to an all-risk policy that explicitly provides coverage for types of clean-up costs. required to remove debris from covered property.
In support of the Supreme Court's review, the restaurant cites more than 50 cases in which the eleventh district's opinion is quoted by insurers in COVID-19 claims to claim that virus contamination is not direct. physical loss because a virus, such as dust, can simply be cleaned or disinfected. Although this condition is deficient in connection with construction dust, it is not particularly applicable to COVID-19.
The coronavirus differs significantly from dust in several respects – it cannot be seen with the naked eye; it can not be cleaned from surfaces and air in any practical way; and as a result of these remediation difficulties, it transforms the physical property from a safe state into a dangerous, potentially fatal transfer mechanism, rendering the property unusable and unsuitable for the intended purpose.
Whether, when and for how long this occurs, however, are actual questions that are best addressed through expert opinions, which Mama Jo addresses in her presentation. More importantly, for the thousands of ongoing COVID-19 business interruption lawsuits, actual questions about the nature, extent, and duration of the impact that a virus can have on property (primarily surfaces and indoor air) cannot be decided by the court on a rule 12 (b) motion ( or in some cases even summary judgment, as was the case in Mama Jo & # 39 ;s ), which appears in many COVID-19 claims across the country, where all well-known facts must be accepted as true and only need to reasonably assert a covered claim. In fact, policyholders seeking coverage under a full risk policy for commercial real estate such as those in Mama Jo & # 39 ;s and many other cases only need to claim an accidental loss that is not explicitly excluded from the terms of the policy.
The motif of the Eleventh Circle also errs when it injects a temporal element in the phrase "direct physical loss" that requires permanent damage or storage of property. Suggesting that dust can not "damage" property because the condition is only temporary is not (and never has been) the test. In fact, even in case of fire, hail, flood or windstorm, the damage or destruction is considered for repair, replacement or reconstruction. At the same time, the time element coverage contains distinct start and end points, where the interim liability period often explicitly considers using reasonable care and delivery to resume operations as quickly as reasonably possible. Any suggestion that covered loss or damage is permanent therefore ignores these basic factors of time element coverage.
Finally, on a more fundamental level, the courts of Mama Jo seem to have ignored the other "reasonable" Interpretations of the same or similar direct physical loss or damage in question, which necessarily means that the phrase is ambiguous according to Florida (and many other states) laws. To prevail, Mama Jo's needs only need to show that its interpretation is reasonable and, on the contrary, does not need to show that the views of the insurer or other courts are unreasonable. As can be seen from the petition, there are four district courts where federal judges have interpreted "direct physical loss" in the same way as the policyholder in Mama Jo & # 39 ;s which shows that the restaurant's view is reasonable and therefore controlling. regarding the interpretation of the undefined policy language.
When the dust in Mama Jo dispute is resolved, insurers will continue to ignore basic insurance principles and defend Mama Jo & # 39 ;s as a basis for denying coverage. Time will tell whether the eleventh court will see clearly to correct its doubts or whether the Supreme Court will set the record. Until then, Florida policyholders and the eleventh district should anticipate arguments presented on Mama Jo & # 39 ;s and ensure that future complaints provide robust factual allegations describing the mechanism by which COVID-19 causes a direct physical conversion of insured property.