1

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA

Case No. 20-22615-Civ-WILLIAMS/TORRES

MALAUBE, LLC, 

Plaintiff,

v.

GREENWICH INSURANCE COMPANY,

Defendant.

___________________________________________/

REPORT AND RECOMMENDATION

ON DEFENDANT’S MOTION TO DISMISS

This matter is before the Court on Greenwich Insurance Company’s 

(“Defendant” or “Greenwich”) motion to dismiss against Malaube, LLC’s (“Plaintiff”)

amended complaint. [D.E. 10]. Plaintiff responded to Defendant’s motion on July 

30, 2020 [D.E. 14] to which Defendant replied on August 6, 2020. [D.E. 15]. 

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 August 7, 2020, the Honorable Kathleen Williams referred Defendant’s 

motion to dismiss to the undersigned Magistrate Judge for disposition. [D.E. 16].

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I. BACKGROUND

Plaintiff filed this action on April 23, 2020 [D.E.1] in Florida state court,

seeking to recover insurance benefits for the loss of business income as a result of 

government shutdowns in response to the COVID-19 pandemic.2 On September 25, 

2019, Greenwich entered into an insurance contract with Plaintiff with the latter 

agreeing to make payments in exchange for Greenwich’s promise to indemnify for 

losses including business income at Plaintiff’s restaurant.3 Plaintiff alleges that the

insurance policy is in full effect, providing business income and personal property 

insurance from September 25, 2019 to September 25, 2020.

On March 17, 2020, Miami-Dade Mayor Carlos Gimenez signed an order to 

close all restaurants for indoor dining and only permitted takeout and delivery as a 

result of the COVID-19 pandemic. Florida Governor, Ron DeSantis, then issued an 

executive order on March 20, 2020 that closed all onsite dining at restaurants.4 

Plaintiff claims that these orders resulted in significant business losses for 

Plaintiff’s restaurant and that Greenwich was obligated to pay because of 

government orders that prohibited access to indoor dining. When Plaintiff 

demanded payment for these losses, Greenwich denied Plaintiff’s claim because 

Plaintiff did not experience any physical loss or damage to the insured property. 

Plaintiff now fears that, with Greenwich’s improper denial of its insurance benefits, 

 

2 Defendant removed this case to federal court on June 24, 2020 based on the 

Court’s diversity jurisdiction. Plaintiff is a citizen of Florida and Greenwich is a 

citizen of Delaware and Connecticut.

3 The restaurant serves Italian food at 5748 Sunset Drive, Miami, FL 33143.

4 We refer to these collectively as the Florida Emergency Orders.

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its restaurant may be forced to close permanently. Therefore, Plaintiff seeks a 

declaratory judgment that that the insurance policy provides coverage for the losses 

stemming from the government shutdowns including costs, prejudgment interest, 

and attorney’s fees.

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. 

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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 three

independent reasons.5 First, Defendant argues that the insurance policy was never 

triggered because it excludes any coverage for viruses, bacteria, or other 

microorganisms that induce physical distress, illness, or disease. Second, 

Defendant claims that there is no insurance coverage because Plaintiff failed to 

allege that it suffered any direct physical loss or damage to property. And third, 

 

5 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.” 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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Defendant reasons that the two Florida Emergency Orders never prohibited 

Plaintiff from accessing the insured property – a prerequisite that must be satisfied 

before insurance coverage can apply. Before we consider 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, 

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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.

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.

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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

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 

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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 

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. The Business Income Exclusion

Having set forth the relevant legal principles, Defendant’s strongest

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

insurance policy only provides coverage for the actual loss of business income if a 

direct physical loss or damage to the property causes a suspension to Plaintiff’s 

operations:

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.

[D.E. 5-1 at 53]. The policy further provides coverage for extra expenses during a 

period of restoration, but that also only applies if the insured property suffers direct 

physical loss or damage:

Extra Expense Coverage is provided at the premises described in the 

Declarations only if the Declarations show that Business Income 

Coverage applies at that premises. 

Extra Expense means necessary expenses you incur during the “period 

of restoration” that you would not have incurred if there had been on 

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direct physical loss or damage to property caused by or resulting from 

a Coverage Cause of Loss.

Id. at 53.

Defendant argues that Plaintiff has failed to state a claim because there are 

no allegations that the insured property has ever suffered a direct physical loss or 

damage. Instead, Plaintiff alleges that two Florida Emergency Orders limited the 

full use of its restaurant and that, as a result, Plaintiff suffered significant 

businesses losses. [D.E. 5 at ¶¶ 13-14 (“On March 17, 2020, Miami-Dade Mayor, 

Carlos Gimenez, signed an order to close all restaurants for dining in and only 

permitting takeout and delivery. On March 20, 2020, the Florida Governor, Ron 

DeSantis, issued an executive order closing all onsite dining at restaurants”)]. 

Defendant also states that the amended complaint concedes that the Florida 

Emergency Orders were issued in response to the COVID-19 pandemic and entirely 

unrelated to any physical loss or damage to Plaintiff’s property. See id. at 18 (“The 

Government Shutdowns that interfered with [Plaintiff’] access to its business came 

as a result of the COVID-19 pandemic.”). Because Plaintiff’s allegations seek

coverage for pure economic losses stemming with no connection to any physical loss

or damage, Defendant reasons that Plaintiff’s amended complaint must be 

dismissed.

Plaintiff’s response is that there is an ongoing debate in both state and 

federal courts on the meaning of “direct physical loss” and “direct physical damage.” 

Plaintiff contends, for example, that the use of the “or” in the phrase “direct 

physical loss or damage” suggests that the two terms are not the same, and that 

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they must be distinct. If the terms were the same, Plaintiff believes that it would 

render some component of the insurance policy meaningless and undermine a 

fundamental rule of Florida contract law. See, e.g., Westport Ins. Corp. v. Tuskegee

Newspapers, Inc., 402 F.3d 1161, 1166 (11th Cir. 2005) (“[A] court will attempt to 

give meaning and effect, if possible, to every word and phrase in the contract, . . . 

and a construction which neutralizes any provision of a contract should never be 

adopted if the contract can be so construed as to give effect to all the provisions.”)

(quoting J. Appleman, Insurance Law and Practice § 7383 (1981)).

Plaintiff also states that the Florida Emergency Orders caused a direct 

physical loss because they forced Plaintiff to close its indoor dining to mitigate the 

spread of COVID-19. As support, Plaintiff references several state and federal court 

opinions – some of which date back to the 1970s – with a contention that these are 

the “better reasoned cases” in the ongoing debate and that they are consistent with 

Florida law. Plaintiff then asserts, with a reference to several other cases, that the 

inability to use the intended purpose of a business constitutes a direct physical loss 

because Plaintiff had no option other than to close the indoor dining section of its

restaurant. Thus, Plaintiff equates the closure of its indoor dining to a physical loss 

because the business could no longer operate for its intended purpose.

To begin, Plaintiff’s response is, in many respects, unhelpful because it is 

conclusory and fails to put forth any substantive reasons in support of its position. 

Plaintiff makes assertions, for example, that physical damage is different from 

physical loss and then follows that statement with a string cite of parentheticals 

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with no explanation as to how any of the cases are relevant. Plaintiff complicates 

matters further when it references cases, some of which are decades old, across the 

country (including Michigan, Minnesota, and California) but then fails to offer any 

analysis whatsoever. Plaintiff just leaves it for the Court to examine these cases, 

and to do the work that Plaintiff should have done in the first place. That is, 

Plaintiff invites the Court to develop its own argument and determine which of 

these cases (1) are relevant to Florida law, (2) are applicable to the insurance policy 

in this case, (3) offers a persuasive distinction between physical loss and damage, 

and (4) are analogous to the partial closure of a business. Hence, Plaintiff’s 

response is largely unpersuasive. See United States Liab. Ins. Co. v. Bove, 347 So.

2d 678, 680 (Fla. 3rd DCA 1977) (stating that a party claiming coverage has the 

burden of proof to establish that coverage exists). 

Putting aside this problem, Plaintiff argues that physical loss does not 

require structural alteration and that a property’s inability to operate with its 

intended purpose (i.e. the operation of both its indoor and outdoor dining sections) 

falls within the insurance policy’s coverage. The policy does not define “physical 

loss” or “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. 2019) (“[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 is persuasive, in 

some respects, because courts in our district have found 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).

While neither party cited a binding decision on the meaning of “direct 

physical loss” or “direct physical damage” under Florida law, a case that addresses 

many of the arguments presented is a district court’s recent decision in Studio 417,

Inc. v. Cincinnati Ins. Co., 2020 WL 4692385, at *4 (W.D. Mo. Aug. 12, 2020). 

There, the plaintiffs purchased insurance policies for their hair salons and 

restaurants. The policies provided coverage for physical losses or physical damages, 

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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, however, 

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 

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.

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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)); 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.

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

where the damage occurs.”).6

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.

This case is materially different because Plaintiff has not alleged any 

physical harm. There is no allegation, for example, that COVID-19 was physically 

present on the premises. Instead, Plaintiff only alleges that two Florida Emergency 

 

6 In Source Food, the insured’s beef was not allowed to cross from Canada into 

the United States because of an embargo related to mad cow disease. The insured 

was therefore unable to fill orders and had to find a new supplier. The insured 

sought coverage based on a provision requiring “direct physical loss to property,” 

but the district court denied coverage and the Eighth Circuit affirmed, explaining 

that:

Although Source Food’s beef product in the truck could not be 

transported to the United States due to the closing of the border to 

Canadian beef products, the beef product on the truck was not—as 

Source Foods concedes—physically contaminated or damaged in any

manner. To characterize Source Food’s inability to transport its 

truckload of beef product across the border and sell the beef product in 

the United States as direct physical loss to property would render the 

word ‘physical’ meaningless.

Source Food Tech., Inc., 465 F.3d at 838.

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Orders forced the closure of its restaurant. And, as stated earlier, courts have 

found this to be insufficient to state a claim because there must be some allegation 

of actual harm:

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).

Plaintiff’s allegations are insufficient to state a claim for an entirely separate 

reason because, when we examine the language of the insurance policy, “direct 

physical” modifies both “loss” and “damage.” That means 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.’” Philadelphia Parking Authority 

v. Federal Ins. Co., 385 F. Supp. 2d 280, 288 (S.D.N.Y. 2005); see also 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.”). 

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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:

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. v. Miguel Maspons, 211 So. 3d 1067, 1069 (Fla. 

3rd DCA 2017); 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).

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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 

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. 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”

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“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 

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 are 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

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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.

When comparing Mama Jo’s to the allegations in this case, Plaintiff’s 

allegations are far weaker. Although the plaintiff in Mama Jo’s failed to put forth 

any evidence that his cleaning claim constituted a direct physical loss, he at least 

alleged that there was a physical intrusion (i.e. dust and debris) into his restaurant. 

Plaintiff has done nothing similar in this case. 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.

As a last ditch effort, Plaintiff suggests that we should adopt a more 

expansive definition of “direct physical loss or damage,” so that coverage could apply 

if the property is either uninhabitable or substantially unusable. See, e.g., Port

Auth. of New York & New Jersey, 311 F.3d at 236 (“When the presence of large 

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

uninhabitable and unusable, then there has been a distinct loss to its owner.”). 

Assuming we were inclined to ignore both Eleventh Circuit and Florida precedent, 

Plaintiff still fails to state a claim because – even under an expanded definition –

there are no allegations that the restaurant was uninhabitable or substantially 

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unusable. Plaintiff only alleges that the government forced it to close its indoor 

dining to contain the spread of COVID-19. The government permitted Plaintiff to 

continue its takeout and delivery services. While Plaintiff never makes clear 

whether it undertook either of these options, the government never made the 

restaurant uninhabitable or substantially unusable. Therefore, under no definition 

of “direct physical loss or damage” has Plaintiff stated a claim where coverage exists 

under this insurance policy.

Although unnecessary to the disposition of the motion to dismiss, other 

provisions of the insurance policy support the same interpretation. Take, for 

instance, the “Business Income” and “Extra Expense” provisions where it provides 

coverage for Plaintiff’s operations during a “period of restoration.” [D.E. 5-1 at 53]. 

A “period of restoration” is defined in the policy as beginning “(1) 72 hours after the 

time of direct physical loss or damage for Business Income Coverage; or (2) 

[i]mmediately after the time of direct physical loss or damage for Extra Expenses 

Coverage[.]” Id. at 61. The policy then states that this “period of restoration” 

“[e]nds on the earlier of (1) [t]he date when the property at the described premises 

should be repaired, rebuilt or replaced with reasonable speed and similar quality; or 

(2) [t]he date when business is resumed at a new permanent location.” Id.

(emphasis added).

“The words ‘repair’ and ‘replace’ contemplate physical damage to the insured 

premises as opposed to loss of use of it.” Newman Myers Kreines Gross Harris, P.C., 

17 F. Supp. 3d at 332 (United Airlines, 385 F. Supp. 2d at 349 (policy language 

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limiting coverage “for only such length of time [needed] to rebuild, repair or replace 

such part of the Insured Location(s) as has been damaged or destroyed” supports 

the notion that “physical damage is required before business interruption coverage 

is paid”); Philadelphia Parking Auth., 385 F. Supp. 2d at 287 (“‘Rebuild,’ ‘repair’ and 

‘replace’ all strongly suggest that the damage contemplated by the Policy is physical 

in nature.”)). This means that, if we construe “direct physical loss or damage” to 

require actual harm, it gives effect to the other provisions in the policy. And that is 

exactly what Florida law requires us to do so that no section of the insurance policy

is left meaningless. See Aucilla Area Solid Waste Admin. v. Madison Cty., 890 So. 

2d 415, 416–17 (Fla. 1st DCA 2004) (“Pursuant to the principles 

of contract construction, we must construe the provisions of a contract in 

conjunction with one another so as to give reasonable meaning and effect to all of 

the provisions.”) (citing Hardwick Properties, Inc. v. Newbern, 711 So. 2d 35, 40–41 

(Fla. 1st DCA 1998)). And making matters worse, the policy further provides that 

the period of restoration “does not include any increased period required due to the 

enforcement of any ordinance or law that . . . [r]egulates the construction, use or 

repair . . . of any property[.]” [D.E. 5-1 at 61]. Thus, if there was any lingering

doubt on whether a loss of use for pure economic reasons could be recoverable under 

the policy, the other provisions of the policy put that uncertainty to bed.

Accordingly, Defendant’s motion to dismiss should be GRANTED.

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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.7 

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 

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 26th day of 

August, 2020.

/s/ Edwin G. Torres 

EDWIN G. TORRES

United States Magistrate Judge

 

7 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 policy.

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