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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA

Case No. 20-23245-Civ-WILLIAMS/TORRES

GRASPA CONSULTING, INC.

Plaintiff,

v.

UNITED NATIONAL

INSURANCE COMPANY,

Defendant.

___________________________________________/

REPORT AND RECOMMENDATION

ON DEFENDANT’S MOTION TO DISMISS

This matter is before the Court on United National Insurance Company’s 

(“Defendant”) motion to dismiss Graspa Consulting, Inc.’s (“Plaintiff”) amended 

complaint. [D.E. 15]. Plaintiff responded to Defendant’s motion on October 7, 2020 

[D.E. 20] to which Defendant replied on October 21, 2020. [D.E. 23]. Therefore,

Defendant’s motion is now ripe for disposition. After careful consideration of the 

motion, response, reply, relevant authority, and for the reasons discussed below, 

Defendant’s motion to dismiss should be GRANTED.1

 

1 On October 21, 2020, the Honorable Kathleen Williams referred Defendant’s 

motion to dismiss to the undersigned Magistrate Judge for disposition. [D.E. 24].

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I. BACKGROUND

Plaintiff is a commercial enterprise in the restaurant industry that 

purchased a commercial insurance policy with a period running from May 28, 2019 

to May 28, 2020. The policy provided protection against losses and other expenses 

that might result from an involuntary interruption in business operations.2 In

March 2020, Florida Governor Ron DeSantis issued several executive orders that 

restricted the public’s access to the restaurant industry. Although these orders

were later lifted in the months to follow, local governments issued additional orders

that restricted access to all non-essential business operations in response to the 

COVID-19 pandemic. As a result, Plaintiff suffered significant losses and other 

expenses that now threaten the future of its business.

When Plaintiff demanded payment for these losses, Defendant denied 

Plaintiff’s claim because Plaintiff did not meet one of the prerequisites for coverage

– allegations and evidence of physical loss or damage to the insured property. 

Defendant also takes the position that there is no coverage under the insurance 

policy because it contains a broadly worded exclusion for any loss resulting from a 

virus or a pollutant. Plaintiff disagrees because “[d]angerous conditions prohibited 

access to Plaintiff’s property and caused Plaintiff to suffer a direct physical loss 

when its business operations were suspended and it lost the use of its property.” 

[D.E. 12 at ¶ 61]. Plaintiff therefore filed this action on June 11, 2020 in Florida 

 

2 The policy provided coverage to ten locations in Miami, Miami Beach, and 

Coral Gables, Florida.

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state court for breach of contract, seeking compensatory damages, prejudgment 

interest, court costs, and fees.3

II. APPLICABLE PRINCIPLES AND LAW

Under Federal Rule of Civil Procedure 12(b)(6), a court may dismiss a claim 

for failure to state a claim upon which relief can be granted. “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) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). 

Conclusory statements, assertions or labels will not survive a 12(b)(6) motion to 

dismiss. Id. “A claim has facial plausibility when the plaintiff pleads factual 

content that allows the court to draw the reasonable inference that the defendant is 

liable for the misconduct alleged.” Id.; see also Edwards v. Prime, Inc., 602 F.3d 

1276, 1291 (11th Cir. 2010) (setting forth the plausibility standard). “Factual 

allegations must be enough to raise a right to relief above the speculative level[.]” 

Twombly, 550 U.S. at 555 (citation omitted). Additionally:

Although it must accept well-pled facts as true, the court is not 

required to accept a plaintiff's legal conclusions. Ashcroft v. Iqbal, 556 

U.S. 662, 678 (2009) (noting “the tenet that a court must accept as true 

all of the allegations contained in a complaint is inapplicable to legal 

conclusions”). In evaluating the sufficiency of a plaintiff's pleadings, 

we make reasonable inferences in Plaintiff's favor, “but we are not 

required to draw plaintiff’s inference.” Aldana v. Del Monte Fresh 

Produce, N.A., Inc., 416 F.3d 1242, 1248 (11th Cir. 2005). Similarly, 

“unwarranted deductions of fact” in a complaint are not admitted as 

true for the purpose of testing the sufficiency of plaintiff's allegations. 

 

3 Defendant removed this case to federal court on August 5, 2020 pursuant to 

the Court’s diversity jurisdiction. Plaintiff is a Florida corporation with its 

principal place in Florida, and Defendant is a Pennsylvania corporation with its 

principal place of business in Pennsylvania.

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Id.; see also Iqbal, 556 U.S. at 681 (stating conclusory allegations are 

“not entitled to be assumed true”).

Sinaltrainal v. Coca-Cola, 578 F.3d 1252, 1260 (11th Cir. 2009), abrogated on other

grounds by Mohamad v. Palestinian Auth., 566 U.S. 449, 453 n.2, (2012). The 

Eleventh Circuit has endorsed “a ‘two-pronged approach’ in applying these 

principles: 1) eliminate any allegations in the complaint that are merely legal 

conclusions; and 2) where there are well-pleaded factual allegations, ‘assume their 

veracity and then determine whether they plausibly give rise to an entitlement to 

relief.’” American Dental Ass’n v. Cigna Corp., 605 F.3d 1283, 1290 (11th Cir. 2010)

(quoting Iqbal, 556 U.S. at 679).

III. ANALYSIS

Defendant seeks to dismiss Plaintiff’s amended complaint for two reasons.4 

First, Defendant argues that the insurance policy fails to provide coverage because 

Plaintiff failed to allege that it suffered any direct physical loss as a result of an

involuntary business closure. Defendant claims that this is a requirement for 

coverage and that every provision in the policy includes this condition. Second, 

Defendant argues that, even if a direct physical loss had been alleged, the policy 

 

4 In determining whether Plaintiff’s amended complaint fails to state a claim, 

we may consider the language of the policy itself because exhibits are part of a 

pleading “for all purposes,” and Plaintiff attached it in this case. Fed. R. Civ. P.

10(c); see also Solis–Ramirez v. U.S. Dep’t of Justice, 758 F.2d 1426, 1430 (11th Cir.

1985) (“Under Rule 10(c) Federal Rules of Civil Procedure, such attachments are 

considered part of the pleadings for all purposes, including a Rule 12(b)(6) motion.”). 

To the extent the complaint’s allegations conflict with the exhibit, the exhibit must 

control. See Hoefling v. City of Miami, 811 F.3d 1271, 1277 (11th Cir. 2016) (“A 

district court can generally consider exhibits attached to a complaint in ruling on a 

motion to dismiss, and if the allegations of the complaint about a particular exhibit 

conflict with the contents of the exhibit itself, the exhibit controls.”) (citing

Crenshaw v. Lister, 556 F.3d 1283, 1292 (11th Cir. 2009)).

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contains broad exclusions for viruses and other pollutants that apply to the COVID19 pandemic. Before we turn to the merits, we must consider the general principles 

governing the interpretation of insurance contracts under Florida law. These 

principles are necessary, as they will inform the analysis that follows.

A. General Principles of Insurance Contracts

“Under Florida law, an insurance policy is treated like a contract, and 

therefore ordinary contract principles govern the interpretation and construction of 

such a policy.” Pac. Emp’rs Ins. Co. v. Wausau Bus. Ins. Co., 2007 WL 2900452, at

*4 (M.D. Fla. Oct. 2, 2007) (citing Graber v. Clarendon Nat'l Ins. Co., 819 So. 2d

840, 842 (Fla. 4th DCA 2002)). The interpretation of an insurance contract –

including the question of whether an insurance provision is ambiguous – is a 

question of law. See id.; Travelers Indem. Co. of Illinois v. Hutson, 847 So. 2d 1113

(Fla. 1st DCA 2003) (stating that whether an ambiguity exists in a contract is a 

matter of law).

In addition, “[u]nder Florida law, insurance contracts are construed according 

to their plain meaning.” Garcia v. Fed. Ins. Co., 473 F.3d 1131, 1135 (11th Cir.

2006) (quoting Taurus Holdings, Inc. v. U.S. Fid. & Guar. Co., 913 So. 2d 528, 532

(Fla. 2005)). The “terms of an insurance policy should be taken and understood in 

their ordinary sense and the policy should receive a reasonable, practical and 

sensible interpretation consistent with the intent of the parties-not a strained, 

forced or unrealistic construction.” Siegle v. Progressive Consumers Ins. Co., 819 So.

2d 732, 736 (Fla. 2002) (quoting Gen. Accident Fire & Life Assurance Corp. v.

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Liberty Mut. Ins. Co., 260 So. 2d 249 (Fla. 4th DCA 1972)); see also Gilmore v. St.

Paul Fire & Marine Ins., 708 So. 2d 679, 680 (Fla. 1st DCA 1998) (“The language of 

a policy should be read in common with other policy provisions to accomplish the 

intent of the parties.”). 

However, if there is more than one reasonable interpretation of an insurance 

policy, an ambiguity exists and it “should be construed against the insurer.” Pac.

Emp’rs Ins., 2007 WL 2900452, at *4 (citing Purrelli v. State Farm Fire & Cas.

Co., 698 So. 2d 618, 620 (Fla. 2d DCA 1997)). Where an interpretation “involve[s] 

exclusions to insurance contracts, the rule is even clearer in favor of strict 

construction against the insurer: exclusionary provisions which are ambiguous or 

otherwise susceptible to more than one meaning must be construed in favor of the 

insured.” Sphinx Int’l, Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., 412 F.3d

1224, 1228 (11th Cir. 2005) (quoting State Farm Mut. Auto. Ins. Co. v. Pridgen, 498

So. 2d 1245, 1248 (Fla. 1986)). An insurance policy must, of course, be ambiguous 

before it is subject to these rules. See Taurus Holdings, Inc., 913 So. 2d at 532 

(“Although ambiguous provisions are construed in favor of coverage, to allow for 

such a construction the provision must actually be ambiguous.”). An ambiguous 

policy must, for example, have a genuine inconsistency, uncertainty, or ambiguity in 

meaning after the court has applied the ordinary rules of construction. See Deni

Assocs. of Florida, Inc. v. State Farm Fire & Cas. Ins. Co.,711 So. 2d 1135 (Fla.

1998). “Just because an operative term is not defined, it does not necessarily mean 

that the term is ambiguous.” Amerisure Mut. Ins. Co. v. Am. Cutting & Drilling

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Co., 2009 WL 700246, at *4 (S.D. Fla. Mar. 17, 2009) (citing Swire Pac. Holdings,

Inc. v. Zurich Ins. Co., 845 So. 2d 161, 166 (Fla. 2003)).

On the other hand, “if a policy provision is clear and unambiguous, it should 

be enforced according to its terms whether it is a basic policy provision or an 

exclusionary provision.” Hagen v. Aetna Cas. & Sur. Co., 675 So. 2d 963, 965 (Fla.

5th DCA 1996). Ultimately “in the absence of some ambiguity, the intent of the 

parties to a written contract must be ascertained from the words used in the 

contract, without resort to extrinsic evidence.” Fireman’s Fund Ins. Co. v. Tropical

Shipping & Const. Co., 254 F.3d 987, 1003 (11th Cir. 2001) (quoting Lee v.

Montgomery, 624 So. 2d 850, 851 (Fla. 1st DCA 1993)).

When the parties dispute coverage and exclusions under a policy, a burdenshifting framework applies. “A person seeking to recover on an insurance policy has 

the burden of proving a loss from causes within the terms of the policy[,] and if such 

proof of loss is made within the contract of insurance, the burden is on the insurer 

to establish that the loss arose from a cause that is excepted from the policy.” U.S.

Liab. Ins. Co. v. Bove, 347 So. 2d 678, 680 (Fla. 3d DCA 1977) (alteration added; 

citations omitted). If the insurer is able to establish that an exclusion applies, the 

then burden shifts back to the insured to prove an exception to the exclusion. See 

id.; see also IDC Const., LLC. v. Admiral Ins. Co., 339 F. Supp. 2d 1342, 1348 (S.D. 

Fla. 2004) (“When an insurer relies on an exclusion to deny coverage, it has the 

burden of demonstrating that the allegations in the complaint are cast solely and 

entirely within the policy exclusions and are subject to no other reasonable 

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interpretation.”). That is, “if there is an exception to the exclusion, the burden once 

again is placed on the insured to demonstrate the exception to the exclusion.” East

Fla. Hauling, Inc. v. Lexington Ins. Co., 913 So. 2d 673, 678 (Fla. 3d DCA 2005)

(citing LaFarge Corp. v. Travelers Indem. Co., 118 F.3d 1511, 1516 (11th Cir. 1997)).

B. Direct Physical Loss or Direct Physical Damage

Having set forth the relevant facts and legal principles, Defendant argues 

that Plaintiff’s amended complaint fails to state a claim because the insurance 

policy only provides coverage for the loss of business income if the covered property 

suffers a direct physical loss or physical damage. Defendant claims that every 

policy provision includes this requirement and that coverage only exists if Plaintiff’s 

property suffered actual harm. Defendant then references the policy’s Business 

Income and Extra Expense provision where it includes this express condition:

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, including personal property in the open (or in a 

vehicle) within 100 feet, 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. 

[D.E. 12-1 at 31 (emphasis added)]. 

Defendant also states that this condition applies to the Extra Expense and 

Civil Authority provisions because they too require a direct physical loss or damage 

to seek relief under the policy:

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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. 

. . . 

We will pay for the actual loss of Business Income you sustain and 

necessary Extra Expense caused by action of civil authority that 

prohibits access to the described premises due to direct physical loss of 

or damage to property, other than at the described premises, caused by 

or resulting from any Covered Cause of Loss. 

Id. (emphasis added). Ultimately, no matter what provision Plaintiff relies upon, 

Defendant concludes that the amended complaint must be dismissed because an 

allegation of actual harm – as opposed to pure economic losses – is required to seek 

relief under the insurance policy.

Plaintiff’s response is that, while the policy never defines the meaning of the 

terms “direct physical loss or damage”, there is no evidence that these terms should 

require a physical alteration to seek coverage. Instead, Plaintiff asserts that 

Defendant could have made these terms clear in the policy, but that Defendant 

failed to do so. And given Defendant’s failure to require any actual harm, Plaintiff 

requests that we take a broad interpretation of the policy and construe it in favor of 

the insured.

Plaintiff’s next argument is that the proper way to interpret the policy is to 

look to two sections: the definition of a covered cause of loss and the Business 

Income and Extra Expense provision. The policy defines a loss as a “direct physical 

loss” unless the loss is excluded or limited under the policy. Plaintiff interprets this 

definition as meaning that all losses are direct physical losses, including those that 

are excluded from coverage. If true, Plaintiff reasons that the meaning of “direct 

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physical loss” must include something more than actual harm because some of the 

excluded losses – including losses related to government seizures, nuclear reactions, 

and war-related damages – do not require any structural or tangible harm. 

As support for this interpretation, Plaintiff provides a review of several court 

cases and how they have interpreted the meaning of a direct physical loss over the 

last several decades. Plaintiff traces these cases back to a Colorado action and 

explores other jurisdictions – including California, Oregon, Minnesota, New Jersey 

and other states – where courts have found that a direct physical loss can exist 

when a business only becomes unusable. In fact, Plaintiff states that the weight of 

authority leans in its favor and that it shows that there is no requirement for an 

allegation of tangible physical alteration to avail itself of coverage. And since there 

has been fifty-two years of case law that has taken this position, Plaintiff concludes 

that Defendant’s motion to dismiss must be denied.

We begin with the language of the insurance policy. The policy does not 

define “direct physical loss” or “direct physical damage.” However, “[t]he mere 

failure to provide a definition of a term involving coverage does not render the term 

ambiguous.” Those Certain Underwriters at Lloyd’s London v. Karma Korner, LLC,

2011 WL 1150466, at *2 (M.D. Fla. 2011) (citation omitted). When a policy does not 

define a term, the plain and generally accepted meaning should be 

applied. See Evanston Ins. Co. v. S & Q Prop. Inv., LLC, 2012 WL 4855537, at *2

(S.D. Fla. 2012).

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Defendant argues that, under the plain meaning of the word “physical”, 

Plaintiff has not alleged coverage for any loss because, by definition, the policy

excludes losses that are intangible. See, e.g., 10A Couch On Insurance § 148.46 (3d 

Ed. 1998) (“[T]he requirement that the loss be ‘physical,’ given the ordinary 

definition of that term, is widely held to exclude losses that are intangible or 

incorporeal, and, thereby to preclude any claim against the property insurer when 

the insured merely suffers a detrimental economic impact unaccompanied by a 

distinct, demonstrable, physical alteration of the property.”). This point is well 

taken because courts in our district have found – both before and in response to the 

COVID 19-pandemic – that “[a] direct physical loss ‘contemplates an actual change 

in insured property then in a satisfactory state, occasioned by accident or other 

fortuitous event directly upon the property causing it to become unsatisfactory for 

future use or requiring that repairs be made to make it so.”’ Mama Jo’s, Inc. v.

Sparta Ins. Co., 2018 WL 3412974, at *9 (S.D. Fla. June 11, 2018) (quoting MRI

Healthcare Ctr. of Glendale, Inc. v. State Farm Gen. Ins. Co., 187 Cal. App. 4th 766, 

779 (2010)), aff’d, 2020 WL 4782369 (11th Cir. Aug. 18, 2020); see also Infinity

Exhibits, Inc. v. Certain Underwriters at Lloyd’s London Known as Syndicate PEM

4000, 2020 WL 5791583, at *3 (M.D. Fla. Sept. 28, 2020) (“Plaintiff argues that 

economic damage is synonymous with ‘physical loss’ and is therefore covered under 

the Policies. Plaintiff's argument is unpersuasive because Florida law and the plain 

language of the Policies reflect that actual, concrete damage is necessary.”)

(emphasis added).

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Plaintiff pushes back against this argument with reference to a recent

district court’s decision in Studio 417, Inc. v. Cincinnati Ins. Co., 2020 WL 4692385, 

at *4 (W.D. Mo. Aug. 12, 2020), because that case involved the same policy language 

that is now in dispute. There, the plaintiffs purchased insurance policies for their 

hair salons and restaurants. The policies provided coverage for physical losses or 

physical damages, and the plaintiffs argued that they should recover the insurance 

proceeds as a result of the Covid-19 pandemic. The defendants moved to dismiss 

because – with the policies requiring either a direct physical loss or damage – the 

plaintiffs could not recover unless there was an actual, tangible, permanent, or 

physical alteration to the insured properties. The district court rejected that 

argument because “loss” and “damage” could not be conflated with the “or” 

separated between them. Instead, the court had to “give meaning to both terms,” to 

avoid the other from being superfluous. Studio 417, Inc., 2020 WL 4692385, at *5 

(citing Nautilus Grp., Inc. v. Allianz Global Risks US, 2012 WL 760940, at * 7 (W.D. 

Wash. Mar. 8, 2012) (stating that “if ‘physical loss’ was interpreted to mean 

‘damage,’ then one or the other would be superfluous”)).

The district court then referenced several decisions where courts have 

recognized that, absent a physical alteration, a physical loss may occur when a 

property is uninhabitable or substantially unusable for its intended purpose. 

Studio 417, Inc., 2020 WL 4692385, at *5 (citing Port Auth. of New York and New

Jersey v. Affiliated FM Ins. Co., 311 F.3d 226, 236 (3d Cir. 2002) (affirming the 

denial of coverage but recognizing that “[w]hen the presence of large quantities of 

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asbestos in the air of a building is such as to make the structure uninhabitable and 

unusable, then there has been a distinct [physical] loss to its owner”); Prudential

Prop. & Cas. Ins. Co. v. Lilliard-Roberts, 2002 WL 31495830, at * 9 (D. Or. June 18,

2002) (citing case law for the proposition that “the inability to inhabit a building [is] 

a ‘direct, physical loss’ covered by insurance”); General Mills, Inc. v. Gold Medal Ins.

Co., 622 N.W.2d 147, 152 (Minn. Ct. App. 2001) (“We have previously held that 

direct physical loss can exist without actual destruction of property or structural 

damage to property; it is sufficient to show that insured property is injured in some 

way.”)); see also Murray v. State Farm Fire & Cas. Co., 203 W.Va. 477, 509

(1998) (holding policyholders to suffer a “direct physical loss” when their homes 

were rendered uninhabitable due to threat of rockfall); W. Fire Ins. Co. v. First

Presbyterian Church, 165 Colo. 34, 437 P.2d 52, 55 (1968) (holding that the 

policyholder suffered “direct physical loss” when “the accumulation of gasoline 

around and under the [building caused] the premises to become so infiltrated and 

saturated as to be uninhabitable, making further use of the building highly 

dangerous”).

The court also acknowledged that there were cases where an actual 

alteration was required to show a “physical loss,” but distinguished those on the 

basis that they were, for the most part, decided on a motion for summary judgment, 

factually dissimilar, or non-binding. Id. (citing Source Food Tech., Inc. v. U.S. Fid.

& Guar. Co., 465 F.3d 834, 838 (8th Cir. 2006) (affirming the denial of insurance 

coverage on a motion for summary judgment and under Minnesota law)); see also

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Mama Jo’s, Inc., 2018 WL 3412974, at *8 (granting summary judgment in favor of 

the insurance company because the plaintiff could not “show that there was any 

suspension of operations caused by ‘physical damage.”’) (citing Ramada Inn

Ramogreen, Inc. v. Travelers Indem. Co. of Am., 835 F.2d 812, 814 (11th Cir.

1988) (“[R]ecovery is intended when the loss is due to inability to use the premises 

where the damage occurs.”)).

In light of these decisions, the district court denied the defendant’s motion to 

dismiss because the plaintiffs alleged that COVID-19 was a highly contagious virus 

that was physically present in viral fluid particles and deposited on surfaces and 

objects. The plaintiffs further alleged that the physical substance was on the 

premises and caused them to cease or suspend operations. That is, “[r]egardless of 

the allegations in . . . other cases, Plaintiffs . . . plausibly alleged that COVID-19 

particles attached to and damaged their property, which made their premises 

unsafe and unusable.” Studio 417, Inc., 2020 WL 4692385, at *6. And that was 

“enough to survive a motion to dismiss.” Id.

When compared to the facts of this case, Plaintiff’s allegations are far weaker

because it has not even alleged that there was anything on the premises that

caused any physical harm. See [D.E. 12 at 60 (“Plaintiff’s claim for coverage is not 

based on a virus contaminating its premises, and Plaintiff is not seeking to be 

indemnified for the cost of decontamination or business income loss due to 

contamination of its premises.”)]. Instead, Plaintiff claims that Florida’s 

Government suspended the operation of its business. It is therefore difficult to see 

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how Studio 417 is even remotely helpful when the facts of that case are so

distinguishable and several courts have found that there must be an allegation of

actual harm to seek relief under these terms included in the insurance policy:

The critical policy language here—“direct physical loss or damage”—

similarly, and unambiguously, requires some form of actual, physical 

damage to the insured premises to trigger loss of business income and 

extra expense coverage. [Plaintiff] simply cannot show any such loss 

or damage to the 40 Wall Street Building as a result of either (1) its 

inability to access its office from October 29 to November 3, 2012, or (2) 

Con Ed’s decision to shut off the power to the Bowling Green network. 

The words “direct” and “physical,” which modify the phrase “loss or 

damage,” ordinarily connote actual, demonstrable harm of some form 

to the premises itself, rather than forced closure of the premises for 

reasons exogenous to the premises themselves, or the adverse business 

consequences that flow from such closure.

Newman Myers Kreines Gross Harris, P.C. v. Great Northern Ins. Co., 17 F. Supp. 

3d 323, 331 (S.D.N.Y. 2014).

Of course, the more important question is how to interpret the insurance 

policy under Florida law because that is the only law that governs in determining 

whether Plaintiff has coverage.5 And when we examine the language of the 

insurance policy, “direct physical” modifies both “loss” and “damage.” That means 

 

5 Although there are not many published decisions on this issue since the 

COVID-19 pandemic, Florida trial courts have reached the same conclusion in just 

the last few days. See, e.g., Dime Fitness, LLC v. Markel Ins. Co., 2020 WL 

6691467, at *3 (Fla. Cir. Ct. Nov. 10, 2020) (“Plaintiff does not allege a direct 

physical loss. The damage asserted here is business income loss, along with a 

vague reference to “damage” in the form of a denial of access to the premises. 

Therefore, this purely economic loss, as well as a lack of access, would not qualify as 

a covered cause of loss because no direct physical loss has been alleged.”); DAB 

Dental PLLC v. Main Street America Protection Ins. Co., No. 20-CA-5504, at 6 (Fla.

Cir. Ct. Nov. 10, 2020) (granting a motion to dismiss because “[t]here is no 

allegation that COVID-19 physically altered or physically damaged any property. 

Nor is Plaintiff’s lack of access to its own premises a direct physical loss or damage, 

as those terms are defined by Florida law.”); Mace Marine, Inc. v. Tokio Marine 

Specialty Ins. Co., No. 20-CA-120-P (Fla. Cir. Ct. Oct. 8, 2020).

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that “[d]irect and physical modify loss and impose the requirement that the damage 

be actual.” Homeowners Choice Prop. & Cas. v. Miguel Maspons, 211 So. 3d 1067, 

1069 (Fla. DCA 3d 2017) (quotation marks omitted); see also Philadelphia Parking 

Authority v. Federal Ins. Co., 385 F. Supp. 2d 280, 288 (S.D.N.Y. 2005) (finding that 

any “interruption in business must be caused by some physical problem with the 

covered property . . . which must be caused by a ‘covered cause of loss.’”); United

Airlines, Inc. v. Ins. Co. of State of Pa., 385 F. Supp. 2d 343, 349 (S.D.N.Y.

2005), aff’d 439 F.3d 128 (2d Cir. 2006) (“The inclusion of the modifier ‘physical’ 

before ‘damages’ . . . supports [defendant’s] position that physical damage is 

required before business interruption coverage is paid.”).6 

Florida’s appellate courts are in agreement with this interpretation. The 

Third District has found, for instance, that a “loss” constitutes a diminution of value 

and that, with the modifiers “direct” and “physical,” the alleged damage must be 

actual:

 

6 Although Florida law is all that matters, there are several recent COVID-19 

cases that support the undersigned’s interpretation of the insurance policy in this 

case. Take, for instance, a district court’s decision in Turek Enterprises, Inc. v. State

Farm Mutual Automobile Insurance Co., 2020 WL 5258484 (E.D. Mich. Sept. 3,

2020), where the plaintiff chiropractor sought coverage for the loss of income due to 

government orders that restricted the plaintiff’s ordinary use of its property. The 

court dismissed the action with prejudice, holding that the plaintiff had failed to 

demonstrate tangible damage to covered property, as “plainly” required by the 

policy term “direct physical loss.” Id. at *8. The same is true in looking at a district 

court’s decision in 10E, LLC v. Travelers Indemnity Co. of Connecticut, 2020 WL

5359653 (C.D. Cal. Sept. 2, 2020), where the plaintiff sought coverage for income 

lost as a result of government shutdown orders that prevented the ordinary and 

intended use of a property. The court dismissed the action, holding that the 

plaintiffs “cannot recover by attempting to artfully plead impairment to 

economically valuable use of property as physical loss or damage,” and noting that 

impaired use or value cannot substitute for physical loss or damage. Id. at *5.

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A “loss” is the diminution of value of something, and in this case, the 

‘something’ is the insureds’ house or personal property. Loss, Black’s

Law Dictionary (10th ed. 2014). “Direct” and “physical” modify loss 

and impose the requirement that the damage be actual. Examining 

the plain language of the insurance policy in this case, it is clear that 

the failure of the drain pipe to perform its function constituted a 

“direct” and “physical” loss to the property within the meaning of the 

policy.

Homeowners Choice Prop. & Cas., 211 So. 3d at 1069; see also Vazquez v. Citizens

Prop. Ins. Corp., 2020 WL 1950831, at *3 (Fla. 3rd DCA Mar. 18, 2020) (“Consistent 

with this plain meaning, the trial court determined that the ‘insured loss’ is the 

property that was actually damaged.”); Columbiaknit, Inc. v. Affiliated FM Ins. Co.,

1999 WL 619100, at *7 (D. Or. Aug. 4, 1999) (holding that a policyholder could not 

recover under a policy requiring “physical loss” unless the claimed mold physically 

and demonstrably damaged the insured property); MRI Healthcare Ctr. of Glendale,

Inc., 187 Cal. App. 4th at 779 (“A direct physical loss contemplates an actual change 

in insured property then in a satisfactory state, occasioned by accident or other 

fortuitous event directly upon the property causing it to become unsatisfactory for 

future use or requiring that repairs be made to make it so.”) (internal quotation 

marks and citation omitted); Mastellone v. Lightning Rod Mut. Ins. Co., 175 Ohio 

App. 3d 23, 42 (Ohio Ct. App. 2008).

The Eleventh Circuit’s decision in Mama Jo’s Inc. v. Sparta Ins. Co., 2020 WL 

4782369, at *1 (11th Cir. Aug. 18, 2020), is also consistent with our interpretation of 

Florida law. There, the plaintiff owned and operated a restaurant and, from 

December 2013 until June 2015, there was roadway construction in its general 

vicinity. The construction generated dust and debris, requiring the plaintiff to 

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perform daily cleanings. Although the restaurant was open every day during the 

roadwork, customer traffic decreased and the business suffered an economic loss. 

The plaintiff was insured under a policy, which included coverage for loss of 

business. This policy covered “direct physical loss of or damage to Covered Property 

. . . caused by or resulting from any Covered Cause of Loss.” Id. at *1 (citation and 

quotation marks omitted). The plaintiff submitted a claim to the insurer on the 

basis that dust and debris caused a loss in business. The insurer denied that claim 

because the proof of loss form failed to reflect the existence of any physical damage

(and it was questionable whether a direct physical loss occurred). Thus, the insurer 

concluded that plaintiff’s claim was not covered under the policy. 

After finding no error in the district court’s decision to exclude several of the 

plaintiff’s experts, the Eleventh Circuit found that the plaintiff failed to show any 

evidence of direct physical loss or damage. The plaintiff alleged that his insurance 

claim had two components: one for cleaning the restaurant and another for the loss 

of business income. And in determining whether coverage existed, the Court looked 

to the same Florida decisions we referenced above and found that “direct physical 

loss” is defined as a diminution in value and that the modifiers “direct” and 

“physical” “imposed the requirement that the damage be actual.” Id. (citing

Homeowners Choice Prop. & Cas., 211 So. 3d at 1069; Vazquez, 2020 WL 1950831, 

at *3). 

The Court then examined whether coverage existed for the cleaning claim 

because the plaintiff’s public adjuster testified that cleaning and painting was all 

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that was required. In fact, there was no need for the removal or replacement of any 

items during the construction. The Eleventh Circuit found that, based on the 

evidence that the district court considered, the cleaning claim did not constitute a 

direct physical loss because these expenses were merely economic losses. Id. at *8 

(“We conclude that the district court correctly granted summary judgment on 

Berries’ cleaning claim because, under Florida law, an item or structure that merely 

needs to be cleaned has not suffered a ‘loss’ which is both ‘direct’ and ‘physical.’”) 

(citing Maspons, 211 So. 3d at 1069 (recognizing that “damage [must] be

actual”); Vazquez, 2020 WL 1950831, at *3 (same)); see also Universal Image Prods.,

Inc. v. Fed. Ins. Co., 475 F. App’x 569, 573 (6th Cir. 2012) (“[C]leaning . . . expenses .

. . are not tangible, physical losses, but economic losses.”); MRI Healthcare Ctr. of

Glendale, Inc., 187 Cal. App. 4th at 779 (“A direct physical loss ‘contemplates an

actual change in insured property.”); AFLAC Inc. v. Chubb & Sons, Inc., 260 Ga. 

App. 306, 307 (2003) (same).

The Eleventh Circuit also agreed with the district court, with respect to the

business loss claim, because that too required that a suspension of operations be

caused by direct physical loss or damage to the property. Yet, the plaintiff failed to

put forward any evidence that it suffered a direct physical loss or damage during

the policy period. And in the absence of any evidence of actual damage, the

Eleventh Circuit concluded that the district court was correct in granting the

insurer’s motion for summary judgment.

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Although Mama Jo’s was not about any closures related to the COVID-19 

pandemic nor did it concern the same procedural posture, the plaintiff in that case 

at least alleged that there was a physical intrusion into the restaurant in the form 

of dust and debris. Plaintiff has done nothing similar in this case. Plaintiff merely 

claims that Florida’s Government temporarily closed its business. But, this cannot 

state a claim because – as the cases demonstrate above – the loss must arise to

actual damage. See Mama Jo’s Inc., 823 F. App’x at 879 (“‘Direct’ and ‘physical’ 

modify loss and impose the requirement that the damage be actual.”) (citing Florida 

cases). And it is not plausible how the allegations in this case meet that threshold

when Plaintiff’s business merely suffered economic losses as opposed to anything 

tangible, actual, or physical. 7

Plaintiff tries to sidestep these cases with several clever arguments, but none 

are effective. Plaintiff argues, for instance, that there is nothing “physical” about 

losses related to several exclusions, including losses related to government seizures, 

nuclear reactions, and war-related damages. These contentions are not even 

remotely convincing, in part, because Plaintiff fails to reference any authority and 

then makes these assertions without any explanation of how these circumstances

could occur without actual harm. [D.E. 20 at 8 (“The losses contemplated by these 

 

7 Plaintiff tries to pushback against Mama Jos’s with arguments that the case 

was decided on a motion for summary judgment and that the Court’s discussion of a 

direct physical loss constitutes dicta. Neither of these points is persuasive. The 

procedural posture is, of course, a distinguishing characteristic but the underlying 

rule that the Court relied on still applies because the meaning of “direct physical 

loss or damage” requires actual harm under Florida law. We also disagree that the 

Court’s discussion on this point constitutes dicta. But, even if it did, Plaintiff has no 

answer as to why this is not persuasive nor does Plaintiff grapple with the Florida 

cases that the Eleventh Circuit relied upon. 

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exclusions are not ‘physical’ losses in the sense promoted by Defendant. They 

encompass losses that do not arise from structural or tangible damage to covered 

property, but instead deprive the insured of the property’s intended use.”)].

But, putting aside the conclusory nature of these arguments, they are also 

illogical because if, for example, a property suffered damage at the hands of a 

nuclear explosion, that would of course have a direct physical impact on a structure. 

There is even a question on whether a building would be left standing and, if so, 

there would still be radiation that could damage the property and trigger coverage 

under the policy. The same is true if the government seized property or if a 

structure was damaged during a war. Indeed, Plaintiff’s hypotheticals do more 

harm than good to its position because they highlight the differences between actual 

harm and economic losses. On one hand, we have hypotheticals where a building is 

not even left standing and, on the other, there are executive orders that direct a 

business to temporarily close its doors. They are not remotely the same. 

Left with nothing else to rely on, Plaintiff turns its attention to other state 

and federal court cases to salvage its argument. There is no need to consider any of 

these cases because we have already considered the Eleventh Circuit’s view on this 

question and, most importantly, Florida’s appellate courts. And they are both in 

agreement that the harm suffered must be actual when interpreting the meaning of 

these terms in an insurance policy. See Mama Jo’s Inc., 823 F. App’x at 879

(“Florida’s District Court of Appeals for the Third District has addressed the 

definition of ‘direct physical loss’: ‘A ‘loss’ is the diminution of value of something . . . 

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‘Direct’ and ‘physical’ modify loss and impose the requirement that the damage be 

actual.”) (citations omitted); see also Malaube, LLC v. Greenwich Ins. Co., 2020 WL 

5051581, at *8 (S.D. Fla. Aug. 26, 2020) (“Plaintiff merely claims that two Florida 

Emergency Orders closed his indoor dining. But, for the reasons already stated, 

this cannot state a claim because the loss must arise to actual damage. And it is 

not plausible how two government orders meet that threshold when the restaurant 

merely suffered economic losses – not anything tangible, actual, or physical.”). This 

means that, even if the cases that Plaintiff references are somehow persuasive, 

there is no need to consider them if Florida law has already provided a clear answer 

on the interpretation of these terms in a Florida insurance policy. Accordingly, 

Defendant’s motion to dismiss should be GRANTED for the failure to allege any 

actual harm to the insured property.8

IV. CONCLUSION

For the foregoing reasons, the Court RECOMMENDS that Defendant’s

motion to dismiss be GRANTED. If viable under Rule 11, any amended complaint 

should be filed within (14) fourteen days from the date the District Judge adopts 

this Report and Recommendation. 

Pursuant to Local Magistrate Rule 4(b) and Fed. R. Civ. P. 73, the parties 

have fourteen (14) days from service of this Report and Recommendation within 

which to file written objections, if any, with the District Judge. Failure to timely 

 

8 Because Plaintiff’s complaint fails for the reasons stated above, we offer no 

opinion on Defendant’s remaining arguments. To the extent Plaintiff files an 

amended complaint, it should ensure that it can survive any other exclusion that 

may exist under the insurance policy.

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file objections shall bar the parties from de novo determination by the District 

Judge of any factual or legal issue covered in the Report and shall bar the parties 

from challenging on appeal the District Judge’s Order based on any unobjected-to 

factual or legal conclusions included in the Report. 28 U.S.C. § 636(b)(1); 11th Cir. 

Rule 3-1; see, e.g., Patton v. Rowell, 2017 WL 443634 (11th Cir. Feb. 2, 2017); Cooley 

v. Commissioner of Social Security, 2016 WL 7321208 (11th Cir. Dec. 16, 2016).

DONE AND SUBMITTED in Chambers at Miami, Florida, this 17th day of 

November, 2020.

/s/ Edwin G. Torres 

EDWIN G. TORRES

United States Magistrate Judge

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