SA Palm Beach, LLC v. Certain Underwriters at Lloyd's London ( 2022 )

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[PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 20-14812
____________________
SA PALM BEACH, LLC,
on 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.
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2 Opinion of the Court 20-14812
____________________
Appeal from the United States District Court
for the Southern District of Florida
D.C. Docket No. 9:20-cv-80677-UU
____________________
____________________
No. 21-10190
____________________
EMERALD COAST RESTAURANTS, INC.,
Plaintiff-Appellant,
versus
ASPEN SPECIALTY INSURANCE COMPANY,
Defendant-Appellee.
____________________
Appeal from the United States District Court
for the Northern District of Florida
D.C. Docket No. 3:20-cv-05898-TKW-HTC
____________________
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20-14812 Opinion of the Court 3
____________________
No. 21-10490
____________________
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.
____________________
Appeal from the United States District Court
for the Middle District of Florida
D.C. Docket No. 8:20-cv-02323-JSM-AEP
____________________
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4 Opinion of the Court 20-14812
____________________
No. 21-10672
____________________
ROCOCO STEAK, LLC,
d.b.a. Rococo Steak,
Plaintiff-Appellant,
versus
ASPEN SPECIALTY INSURANCE COMPANY,
Defendant-Appellee.
____________________
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 follow-
ing oral argument—present a common question of insurance
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20-14812 Opinion of the Court 5
coverage prompted by the COVID-19 pandemic. The question is
whether, under Florida law, all-risk commercial insurance policies
providing coverage for “direct physical loss of or damage to” prop-
erty or “direct physical loss or damage to” property insure against
losses and expenses incurred by businesses as a result of COVID-
19.
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 se-
ries 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 imple-
mented 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
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6 Opinion of the Court 20-14812
some of the losses and expenses caused by the COVID-19 pan-
demic. When the majority of these claims were rejected, a wave
of lawsuits ensued in the state and federal courts. The insureds
here—SA Palm Beach, LLC, Emerald Coast Restaurants, Inc., Ro-
coco Steak, LLC, and R.T.G. Furniture, Corporation—are among
the Florida businesses denied coverage.
Each of the insureds seeks coverage under an all-risk insur-
ance policy that provides compensation for losses and expenses in-
curred 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 provi-
sions 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 commer-
cial property insurance policy to SA Palm Beach. The policy pro-
vides in relevant part that Lloyd’s will “pay for direct physical loss
1 We do not summarize or discuss policy provisions not raised by the insureds
on appeal. And because we hold that the Florida Supreme Court would deny
coverage under the allegations in the complaints before us, we do not reach
the exclusions cited by the insurers.
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20-14812 Opinion of the Court 7
of or damage to Covered Property . . . caused by or resulting from
any Covered Cause of Loss.” See SA Palm Beach Policy, D.E. 24-1,
at 46 (emphasis added). As relevant here, the policy defines “Cov-
ered Causes of Loss” as “direct physical loss unless the loss is ex-
cluded or limited in this policy,” id. at 36 (emphasis added), but it
does not define the terms “direct,” “physical,” “loss,” or “damage.”
In its complaint, SA Palm Beach asserted that its policy pro-
vides “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. Specifi-
cally, 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 pay 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).
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8 Opinion of the Court 20-14812
The policy defines “suspension” as “[t]he slowdown or ces-
sation of your business activities” or “[t]hat a part or all of the [in-
sured] premises is rendered untenantable[.]” See id. at 70. The
“period of restoration” is defined as the period of time that:
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] prem-
ises should be repaired, rebuilt or replaced with rea-
sonable speed and similar quality; or
(2) The date when business is resumed at a new per-
manent location.
Id. at 68 (emphases added).
SA Palm Beach alleged that—in abiding by the closure or-
ders—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,
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20-14812 Opinion of the Court 9
lost business income, and forced physical alterations during a pe-
riod of restoration.” Id. at ¶ 45. Notably, SA Palm Beach main-
tained that the closure orders were “the sole proximate cause” of
its losses and disclaimed any argument that “the virus itself caused
damage to [its] . . . property.” Id. at ¶ 54.
Lloyd’s moved for dismissal under Rule 12(b)(6), asserting
that SA Palm Beach had failed to sufficiently allege direct physical
loss of or damage to the insured property, a necessary predicate for
coverage under the Business Income and Extra Expenses provi-
sions of the policy. Additionally, Lloyd’s argued that the words
“repair[ ], rebuil[d], and replace[ ]” in the definition of “period of
restoration” mean that “loss” under the policy necessarily implies
physical damage.
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 suit-
able for its intended purpose 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 dif-
ferent than damage.
The district court granted the motion to dismiss. Relying in
part on our unpublished decision in Mama Jo’s Inc. v. Sparta Insur-
ance 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
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10 Opinion of the Court 20-14812
court concluded that SA Palm Beach had failed to allege that its
property suffered a loss that was direct and physical, as required to
trigger coverage under the Business Income and Extra Expense
provisions. The court also agreed with Lloyd’s that the language
used to define the “period of restoration” indicated that loss of
functionality and ensuing economic harm are not the kind of actual
damage contemplated in the relevant provisions. The court there-
fore ruled that SA Palm Beach’s allegations were insufficient to es-
tablish coverage under the policy.
B
Emerald Coast operated a sports bar and restaurant in Des-
tin, Florida. See Emerald Coast Amended Complaint at ¶ 15. Like
SA Palm Beach, it was subject to state and local closure orders is-
sued during the COVID-19 pandemic. See id. at ¶¶ 65–72.
Aspen Specialty Insurance issued a commercial property in-
surance 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, however, 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 in-
sured premises. See Emerald Coast Policy, D.E. 7-1, at 60 (empha-
sis added). The policy also contains an Extended Business Income
provision, which reads as follows:
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20-14812 Opinion of the Court 11
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 reasona-
ble 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 Cov-
ered 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 mechani-
cal breakdown or failure of refrigerating, cooling
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12 Opinion of the Court 20-14812
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 in-
terruption of electrical power . . . due to condi-
tions 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 Rule 12(b)(6) motion to dismiss, arguing that
Emerald Coast had failed to allege that it sustained losses as a result
of direct physical loss or damage to the insured property. Emerald
Coast, said Aspen, had only alleged lost income due to the COVID-
19 pandemic and the resulting government closure orders, which
temporarily prevented it from using its property as it was intended.
According to Aspen, the policy provisions require more than tem-
porary loss of use; the phrase “direct physical loss of or damage to”
requires “some discernible tangible impact to the covered prop-
erty.”
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In response, Emerald Coast asserted that nothing in the pol-
icy requires physical “alteration” of the property as a prerequisite
for coverage. Like SA Palm Beach, Emerald Coast argued that the
policy’s use of the disjunctive “or” in the coverage provision indi-
cates that “physical loss” is something separate and apart from
“physical damage”—either of which would satisfy the policy.
The district court agreed with Aspen and granted its motion
to dismiss. It held that the triggering language in the Business In-
come, 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 pan-
demic. See id. at ¶¶ 40–42. 3
Aspen Specialty Insurance issued a commercial property in-
surance policy to Rococo. The policy contains Business Income
and Extra Expense provisions, which are identical to those in the
2 As we discuss in Part IV, the district court did not consider whether Emerald
Coast sufficiently alleged coverage under the Spoilage provision of the policy.
3 Because the complaint was originally filed in state court, some of Rococo’s
filings were combined as an attachment to Aspen’s notice of removal. See
D.E. 1-2 (including both Rococo’s complaint and the insurance policy).
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14 Opinion of the Court 20-14812
policies issued to SA Palm Beach (by Lloyd’s) and to Emerald Coast
(by Aspen), so we don’t repeat their language here. As a reminder,
however, both provisions insure against the necessary suspension
of operations during the “period of restoration” if caused by “direct
physical loss of or damage to” property at the insured premises.
See Rococo Policy, D.E. 1-2, at 90–91 (emphasis added). The Ro-
coco policy does not define the terms “direct,” “physical,” “loss,”
or “damage.”
In its complaint, Rococo alleged that it was “forced to sus-
pend 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/or damage to the covered premises under the
Policy by, among other things, damaging the prop-
erty, denying access to the property, preventing cus-
tomers from physically occupying the property, caus-
ing the property to be physically uninhabitable by
customers, causing its function to be nearly elimi-
nated 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 sus-
tained due to the COVID-19 pandemic.” Id. at ¶ 9 (emphasis
added). Rococo added that the actions taken by civil authorities
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20-14812 Opinion of the Court 15
“were issued in response to dangerous physical conditions and
damage” and “caused a suspension of business operations” at the
restaurant. Id. at ¶ 45.
Aspen moved to dismiss under Rule 12(b)(6), arguing that
Rococo had failed to allege any losses covered under the policy. It
relied on state court decisions interpreting the relevant trigger lan-
guage. It also pointed to other language in the policy, like the Pe-
riod of Restoration provision, which it argued implied the necessity
of tangible harm for coverage.
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 prop-
erty 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 cov-
erage 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
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16 Opinion of the Court 20-14812
proposition 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.
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 sus-
tained financial losses during the COVID-19 pandemic. See id. at ¶
42–50.
Given the nature of its operations, RTG secured 14 commer-
cial property insurance policies in the form of an insurance tower,
which spreads the risk across multiple insurers. The insurers in-
cluded Aspen Specialty Insurance, Crum & Forster Specialty Insur-
ance, 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 Ex-
pense, Contingent Business Interruption, Civil Authority, In-
gress/Egress, and Loss Adjustment Expenses provisions. See id. at
¶ 68. With the exception of the Loss Adjustment Expenses provi-
sion, all of these provisions refer to the “Perils Insured Against”
clause in the policy to determine whether coverage exists. See RTG
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20-14812 Opinion of the Court 17
Policy, D.E. 1-1, at 16–17, 20–21. The “Perils Insured Against”
clause states:
This policy Insures against all risks of direct physical
loss of or damage to property described herein includ-
ing general average, salvage, and all other charges on
shipments covered hereunder; except as hereafter ex-
cluded.
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 of the loss, the amount of loss sustained, and
the amount of loss payable under this policy. This pol-
icy shall not cover the expenses of a public adjuster
and cost of attorneys.
Id. at 31 (emphasis added). RTG does not contend that this provi-
sion—though missing the exact triggering language included in the
other provisions—should be analyzed under a different frame-
work. The common interpretative fight, RTG seems to contend,
is over what constitutes a “direct physical loss of or damage to”
property.
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18 Opinion of the Court 20-14812
Like SA Palm Beach, Emerald Coast, and Rococo, RTG al-
leged that the COVID-19 closure orders prohibited access to its
properties, causing its stores to lose their use and normal function.
See RTG Complaint at ¶¶ 45–50. RTG claimed that its inability to
use or access its properties constituted direct physical loss under
the policy. See id. at ¶ 45.
In addition to alleging loss of use, RTG also asserted that
COVID-19 itself damaged its properties. Though it did not articu-
late 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 Rule 12(b)(6), RTG’s insurers filed a motion to dis-
miss. They argued that RTG had only asserted legal conclusions
and failed to plead facts that would constitute direct physical loss
or damage under the policies.
RTG responded that the closure orders did in fact cause a
loss of use of the property within the meaning of the coverage pro-
visions. It also noted that it had expressly alleged the presence of
COVID-19 on its properties, which would constitute direct physi-
cal 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
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20-14812 Opinion of the Court 19
Lloyd’s London Known as Syndicate PEM 4000, 489 F. Supp. 3d
1303 (M.D. Fla. 2020), the court concluded that economic losses
associated with RTG’s shutdown due to COVID-19 closure orders
did not constitute “physical loss” under Florida law. With regard
to RTG’s allegation that the properties were damaged by the virus
itself, the court concluded—based in part on “common sense”—
that “COVID-19 is incapable of causing a tangible injury to prop-
erty” because it is a “virus that harms people, not structures.”
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 re-
view is therefore 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 Net-
work, 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 plau-
sible 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).
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20 Opinion of the Court 20-14812
III
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 re-
sulting 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 pol-
icy” 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 Resto-
ration, Inc. v. Citizens Prop. Ins. Corp., 322 So. 3d 96, 98 (Fla. 4th
DCA 2021) (internal quotation marks and citation omitted). See
generally Andrew B. Downs & Linda M. Bolduan, 4 Law and Prac.
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of Ins. Coverage Litig. § 52:4 (2021) (explaining that under all-risk
policies “all direct physical losses not excluded are covered”).
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 un-
der 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 re-
quire (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 the
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 com-
mercial 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
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22 Opinion of the Court 20-14812
not located any such decisions and the parties have not pointed us
to any.4
We therefore “consider whatever might lend [us] insight, in-
cluding relevant state precedents, analogous decisions, considered
dicta, scholarly works, and any other reliable data tending convinc-
ingly 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 quo-
tation marks and citation omitted). For the reasons which follow,
4 A Westlaw search yielded a number of Florida cases involving insurance
policies with the phrase “physical loss of or damage to.” These cases, how-
ever, are not very helpful because they involved undisputed tangible harm to
the property or dealt with legal issues not present here. See King’s Ridge
Cmty. Ass’n, Inc. v. Sagamore Ins. Co., 98 So. 3d 74, 75–79 (Fla. 5th DCA 2012)
(additional coverage for collapse based on deflection of trusses and drop ceil-
ing at clubhouse); XL Specialty Ins. Co. v. Aircraft Holdings, LLC, 929 So. 2d
578, 579 (Fla. 1st DCA 2006) (attorney-client privilege issue); Nat’l Union Fire
Ins. Co. of Pittsburgh v. Texpak Group N.V., 906 So. 2d 300, 301–02 (Fla. 3d
DCA 2005) (exception to exclusion); Gen. Star Indem. Co. v. West Fla. Village
Inn, Inc., 874 So. 2d 26, 28–29 (Fla. 2d DCA 2004) (calculation of deductibles);
Edward J. Gerrits, Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, 634 So. 2d
712, 713 (Fla. 3d DCA 1994) (indemnification claim by insured);West Am. Ins.
Co. v. Chateau La Mer II Homeowners Ass’n, Inc., 622 So. 2d 1105, 1106–08
(Fla. 1st DCA 1993) (collapsed balconies in condominium building); C.A.B. St.
George v. Harris, 440 So. 2d 62, 63–64 (Fla. 1st DCA 1983) (damage calculation
for stolen plane that was returned); Harris v. U.S. Fid. & Guar. Co., 409 So. 2d
1210, 1211 (Fla 1st DCA 1982) (explosion of boat engine).
USCA11 Case: 20-14812 Date Filed: 05/05/2022 Page: 23 of 34
20-14812 Opinion of the Court 23
we believe that the Florida Supreme Court would hold that, under
the allegations in the complaints before us, there is no coverage.
B
Although there are many different approaches by which fed-
eral 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 de-
cide an unsettled issue. We “presume that [state] courts would
adopt the majority view on a legal issue in the absence of indica-
tions to the contrary.” Bobo v. Tenn. Valley Auth., 855 F.3d 1294,
1304 (11th Cir. 2017) (using this presumption to determine Ala-
bama 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 to” requires a tan-
gible alteration to the covered property:
5 The case relied upon by Hensley did not use the term “presumption,” but
merely noted that our view of Mississippi law was “in agreement with the
general body of UCC law[.]” United States v. Southeast Miss. Livestock
Famers Ass’n, 619 F.2d 435, 439 (5th Cir. 1980). Nevertheless, what started
out as general agreement or consistency with the majority view has now be-
come a presumption that state courts will align themselves with the majority
position, absent contrary indications.
USCA11 Case: 20-14812 Date Filed: 05/05/2022 Page: 24 of 34
24 Opinion of the Court 20-14812
The requirement that the loss be “physical,” given the
ordinary definition of that term, is widely held to ex-
clude alleged losses that are intangible or incorporeal
and, thereby, to preclude any claim against the prop-
erty insurer when the insured merely suffers a detri-
mental economic impact unaccompanied by a dis-
tinct, demonstrable, physical alteration of the prop-
erty.
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 pan-
demic has come to the same conclusion and held that some tangi-
ble 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
USCA11 Case: 20-14812 Date Filed: 05/05/2022 Page: 25 of 34
20-14812 Opinion of the Court 25
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) (Mis-
souri law); 10012 Holdings, Inc. v. Sentinel Ins. Co., Ltd., 21 F.4th
216, 220–23 (2d Cir. 2021) (New York law); Santo’s Italian Café 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) (Mas-
sachusetts law); Ind. Repertory Theatre v. Cincinnati Cas. Co., 180
N.E.3d 403, 408–11 (Ind. Ct. App. 2022) (Indiana law); Sweet Berry
Café, 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)
USCA11 Case: 20-14812 Date Filed: 05/05/2022 Page: 26 of 34
26 Opinion of the Court 20-14812
(Ohio law); Inns-by-the-Sea v. Cal. Mut. Ins. Co., 71 Cal. App. 5th
688, 698–712 (4th Dist., Div. 1 2021) (California law). 6
There are no indications suggesting that the Florida Su-
preme Court would reject the majority view. We therefore pre-
sume 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
6 The majority view is not unanimous, as a number of district courts and state
trial courts have held that tangible injury to covered property is not necessary
under policy provisions identical or similar to the ones at issue here. See, e.g.,
In re Soc’y Ins. Co. COVID-19 Bus. Interruption Prot. Ins. Litig., 521 F. Supp.
3d 729, 738–43 (N.D. Ill. 2021) (Illinois law); Elegant Massage, LLC v. State
Farm Mut. Auto. Ins. Co., 506 F. Supp. 3d 360, 372–376 (E.D. Va. 2020) (Vir-
ginia law); Urogynecology Specialist of Fla. LLC v. Sentinel Ins. Co., 489
F.Supp. 3d 1297, 1301–03 (M.D. Fla. 2020) (Florida law); Studio 417, Inc. v.
Cincinnati Ins. Co., 478 F. Supp. 3d 794, 800–03 (W.D. Mo. 2020) (Missouri
law); Cherokee Nation v. Lexington Ins. Co., 2021 WL 506271, at *3–*6 (Okla.
Dist. Ct. Jan. 28, 2021) (Oklahoma law). Accord Mitchell F. Dolin et al., Bus.
& Com. Litig. Fed. Cts. § 107:37 (5th ed. & Dec. 2021 update) (“Various courts
have found that a structural change in covered property is not required. [ . . . ]
Some courts have suggested that the change in property must be ‘permanent’
or ‘structural’ to qualify as ‘damage.’ That approach seems problematic as it
would remove coverage for commonly covered non-structural damage, like
graffiti or vandalism.”) (footnotes omitted).
USCA11 Case: 20-14812 Date Filed: 05/05/2022 Page: 27 of 34
20-14812 Opinion of the Court 27
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 211 So. 3d 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 in-
sureds’ . . . 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
7 Our own dictionary searches for the words “loss” and “damage” have yielded
definitions of a kindred timbre. “Loss” means “[p]erdition, ruin, destruction,”
Shorter Oxford English Dictionary 1638 (5th ed. 2002), or “[d]estruction,”
American Heritage Dictionary of the English Language 1034 (4th ed. 2009).
“Damage” means “[h]arm done to a thing or (less usually . . . ) person: esp.
physical injury impairing value or usefulness,” Shorter Oxford English Dic-
tionary at 596, or “[h]arm or injury to property or to a person, resulting in loss
of value or the impairment of usefulness,” American Heritage Dictionary of
the English Language at 458.
USCA11 Case: 20-14812 Date Filed: 05/05/2022 Page: 28 of 34
28 Opinion of the Court 20-14812
constituted a ‘direct’ and ‘physical’ loss to the property within the
meaning of the policy.” Id. at 1068–69. But that failure was the
result of a physical “break”—tangible harm—which would require
“repair” to restore functionality. Id. at 1068.
Though the language in Maspons came from a home-
owner’s policy rather than a commercial insurance policy and is
not identical to the language in the policies before us, it is suffi-
ciently 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 prop-
erty, i.e., a physical break in the drain pipe, and such harm is miss-
ing 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 656 So. 2d at 600. Van-
dals dumped an unknown substance into the sewage treatment fa-
cility, causing the destruction of a bacteria colony that was an inte-
gral part of the sewage treatment process. See id. at 601. The in-
sured then sought to recover under a provision in its commercial
insurance policy for “direct 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 Dis-
trict reversed. The “bacteria colony [was] an integral part of the
USCA11 Case: 20-14812 Date Filed: 05/05/2022 Page: 29 of 34
20-14812 Opinion of the Court 29
sewage treatment facility” and was “specifically attached to and be-
came part of the treatment facility structure.” Id. at 602. As a re-
sult, there was a “tangible injury to the physical structure” because
the unknown “substance actually covered and adhered to the inte-
rior of the structure causing destruction of the bacteria colony
which was an integral part of the covered facility.” Id. (emphasis
added). The First District emphasized the amount of work that
was done to restore the sewage treatment facility back to working
order, including “hand chiseling . . . [the] chemical residue” from
the structure. See id. at 601.
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 re-
quire actual, tangible, structural, or concrete harm to property but
merely demands that the property no longer be suitable for its in-
tended 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 con-
struction 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
USCA11 Case: 20-14812 Date Filed: 05/05/2022 Page: 30 of 34
30 Opinion of the Court 20-14812
expenses under the Building and Personal Property Coverage pro-
vision, which covered “direct physical loss of or damage to covered
property” from any covered cause of loss (including “direct physi-
cal loss”); and another under the Business Income Loss provision,
which required that the “suspension” of operations be “caused by
direct physical loss of or damage to” the property. See id. at 879.
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 clean-
ing 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 . . . evidence 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 con-
stitute 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,
USCA11 Case: 20-14812 Date Filed: 05/05/2022 Page: 31 of 34
20-14812 Opinion of the Court 31
and RTG policies, and the Extended Business Income provision of
the Rococo policy, all require that there be a “suspension” or “in-
terruption” of operations and cover certain expenses and losses
during the period in which the covered property is “repaired,” “re-
built,” or “replaced.” See SA Palm Beach Policy at 68; Emerald
Coast Policy at 68; Rococo Policy at 98; RTG Policy at 20. With
regards to the provisions containing such language, there is an-
other reason why coverage does not exist for losses caused by
COVID-19.
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-condi-
tion for coverage of lost business income and other
expenses. Any alternative meaning of the terms
“physical loss” or “physical damage” that does not re-
quire a material alteration to the property would ren-
der meaningless this pre-condition to coverage for
business income loss. [ . . . ] Here, neither the closure
order nor the COVID-19 virus caused present or im-
pending material destruction or material harm that
physically altered the covered property requiring re-
pairs or replacement so that they could be used as in-
tended. 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 cov-
ered premises.
USCA11 Case: 20-14812 Date Filed: 05/05/2022 Page: 32 of 34
32 Opinion of the Court 20-14812
Uncork & Create, 27 F.4th at 932–33 (internal footnotes omitted).
See also Town Kitchen LLC v. Certain Underwriters at Lloyd’s,
London, 522 F. Supp. 3d 1216, 1222 (S.D. Fla. 2021) (“[T]he key
difference between the Plaintiff’s loss of use theory and something
clearly covered—like a hurricane—is that the property did not
change. The world around it did. And for the property to be use-
able again, no repair or change can be made to the property—the
world must change.”). We find this reasoning persuasive and fol-
low it here.
E
RTG and Rococo also argue that their complaints alleged
that COVID-19 itself actually damaged their properties. RTG al-
leged that “the presence of coronavirus particles caused . . . direct
physical damage” to its property. See RTG Complaint at ¶ 33. Ro-
coco 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. Be-
cause they affirmatively pled that COVID-19 damaged their prop-
erties, 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 alleged 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
USCA11 Case: 20-14812 Date Filed: 05/05/2022 Page: 33 of 34
20-14812 Opinion of the Court 33
allegation that there was “physical damage.” As we have ex-
plained, taking the allegations of a “complaint as true does not re-
quire us to ignore specific factual details of the pleading in favor of
general or conclusory allegations[.]” Griffin Indus., Inc. v. Irvin,
496 F.3d 1189, 1205–06 (11th Cir. 2007).
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 ‘physi-
cal.’” 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 stores 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 danger-
ous to human health.” Rococo Br. at 31. But this allegation ap-
pears 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 dam-
age 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 no-
tice of its claim, see Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
(2007) (internal quotation marks omitted and alteration adopted),
and here we do not think that Rococo’s bare allegation that
COVID-19 caused direct physical damage fulfills this obligation.
USCA11 Case: 20-14812 Date Filed: 05/05/2022 Page: 34 of 34
34 Opinion of the Court 20-14812
IV
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 ad-
dress 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 dismis-
sal 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.