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Business Interruption due to COVID-19 NOT Covered under Commercial Property Insurance Policy

Florida has come out with an appellate opinion dealing with business interruption and COVID-19 under a commercial property insurance policy.  In this matter, a restaurant/bar filed suit against its commercial property insurance carrier seeking declaratory relief that the policy covered its “business income losses it suffered when its suspended its operations during the COVID-19 pandemic.”  Commodore d/b/a Greenstreet Café, Inc. v. Certain Underwriters at Lloyd’s London, 47 Fla.L.Weekly D1044a (Fla. 3d DCA 2022).

The commercial property insurance policy at-issue did not contain a virus exclusion.

During the COVID-19 pandemic, Miami issued emergency measures impacting the occupancy of businesses.  Such measures ordered certain restaurants to close on-premise service to customers and prohibited serving food in dining areas.  Naturally, such measures impacted the restaurant and hospitality industry.

The restaurant/bar submitted a claim to its carrier and then sued its carrier for declaratory relief arguing it should be entitled to loss of business income under the policy.  The policy provided in relevant part:

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 premises which are described in the Declarations and for which a Business Income Limit Of Insurance is shown in the Declarations. The loss or damage must be caused by or result from a Covered Cause of Loss. . . .

The bolded language is at the heart of this matter’s coverage issue.  The trial court dismissed the complaint reasoning that “direct physical loss or damage to property” requires a tangible alteration to the property which the restaurant cannot allege based on its COVID-19 allegations and Miami’s emergency measures.  The restaurant appealed.  Although the restaurant had creative coverage arguments based on the novelty of the pandemic and Miami’s emergency measures, those arguments ultimately did not persuade the Third District Court of Appeal.

The Court, finding there was no coverage because there was no actual, tangible alteration to the restaurant/bar, explained:

Reading the phrase “direct physical loss of or damage to” in the context of the entirety of the Business Income (and Extra Expense) Coverage Form further supports our conclusion that loss of intended use alone, without tangible alteration to the property, is not sufficient to trigger coverage under the plain language of the Policy.


Thus, under this Court’s case law and the plain language of the Policy, loss of intended use alone does not constitute “direct physical loss.” Instead, “direct physical loss of or damage to property” requires actual, tangible alteration to the insured property for coverage to be triggered under the Policy. [The restaurant’s] allegation that it suffered economic losses due to the City of Miami and Miami-Dade County closure orders does not satisfy this requirement. In this unique circumstance, where the City and County orders prohibited in-person dining, “[i]t was as if the government temporarily rezoned all restaurants . . . solely for takeout dining.”  And “[t]o the extent [COVID-19] is a physical harm, such as COVID-19 particles present on surfaces in the restaurant, those can be easily cleaned.”  In short, the difference “between [the restaurant’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 useable again, no repair or change can be made to the property — the world must change.” 

Commodore, supra (internal citations omitted).

Please contact David Adelstein at [email protected] or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.




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