Court rejects Florida businesses' argument that insurance should cover losses from COVID-19 shutdown

A federal appeals court Thursday rejected arguments by Florida restaurants and a furniture retailer that insurance policies should have covered losses stemming from shutdowns early in the COVID-19 pandemic.

The 34-page decision in four consolidated cases came after a flood of claims and litigation across the country from businesses that had to temporarily close their doors or scale back operations in 2020 because of government orders.

A three-judge panel of the Atlanta-based 11th U.S. Circuit Court of Appeals ruled that, under Florida law, “there is no coverage because COVID-19 did not cause a tangible alteration of the insured properties.”

The ruling came in cases filed against various insurers by SA Palm Beach, LLC, a restaurant operator in Palm Beach; Emerald Coast Restaurants, Inc., a restaurant and sports-bar operator in Destin; Rococo Steak, LLC, a restaurant operator in St. Petersburg; and R.T.G. Furniture Corp., a Seffner-based operator of the Rooms To Go furniture chain.

Arguments involved whether all-risk commercial insurance policies should cover losses and expenses related to the pandemic. The appeals court focused heavily on parts of the policies that required coverage for “direct physical loss” or damage to properties.

The panel said the businesses alleged, in part, that COVID-19 closure orders prohibited access to their properties, causing stores to lose “use and normal function.” The court cited other cases from across the country in rejecting the businesses’ arguments.

“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,” said the ruling, written by Judge Adalberto Jordan and joined by Chief Judge William Pryor and Judge R. Lanier Anderson. “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.”

The ruling also rejected arguments by Rococo Steakhouse and the Rooms To Go chain that they sustained damage because of COVID-19 being in the buildings. The court said, for example, that the furniture retailer’s “need to clean or disinfect stores to get rid of COVID-19 does not constitute direct physical loss or damage under Florida law.”

The panel, however, sent one issue back to a lower court for further consideration in the Emerald Coast Restaurants case. That issue involved coverage for “spoilage” of food.

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