United States Court of Appeals

for the Fifth Circuit

No. 21-30723

PS Business Management, L.L.C.; CJA Nola Realty, 

L.L.C., 

Plaintiffs—Appellants,

versus

Fireman’s Fund Insurance Company, 

Defendant—Appellee.

Appeal from the United States District Court

for the Eastern District of Louisiana

USDC No. 2:21-CV-1229

Before Richman, Chief Judge, and Ho and Engelhardt, Circuit 

Judges.

Per Curiam:*

PS Business Management and CJA Nola Realty (collectively, 

“Plaintiffs”) sued their commercial property insurer to recover the financial 

* Pursuant to 5th Circuit Rule 47.5, the court has determined that this 

opinion should not be published and is not precedent except under the limited 

circumstances set forth in 5th Circuit Rule 47.5.4.

United States Court of Appeals

Fifth Circuit

FILED

July 6, 2022

Lyle W. Cayce

Clerk

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losses they suffered as a consequence of the COVID-19 pandemic. The 

district court dismissed their complaint for failure to state a claim. We affirm.

I.

PS Business Management has offices in three states and provides 

business consulting services to entertainment professionals. CJA Nola 

Realty manages PS Business Management’s New Orleans office. Like many 

businesses, Plaintiffs suffered losses as a consequence of the COVID-19 

pandemic. 

Both companies filed a claim with their insurers, including Fireman’s 

Fund Insurance Company and Allianz Global Risk, to recover those losses 

under various provisions of their commercial property insurance policy. 

Plaintiffs’ policy includes a communicable disease provision that establishes 

coverage for certain specified losses if there has been a qualifying 

“communicable disease event.” Coverage under all other relevant 

provisions of the policy is triggered by “direct physical loss or damage” to 

the property. 

After Plaintiffs’ claim for coverage was denied, they brought this 

action in Louisiana state court against Fireman’s Fund, Allianz Global Risk, 

and Allianz Global Corporate & Specialty, SE “for damages and asserting 

bad faith in the denial of coverage.” Defendants removed the action to 

federal court on diversity grounds, and Plaintiffs voluntarily dismissed the 

Allianz defendants from the action.

Fireman’s Fund, the sole remaining defendant, moved to dismiss 

Plaintiffs’ complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil 

Procedure. The district court granted the motion after concluding that the 

communicable disease coverage provision did not apply and that, by 

requiring “direct physical loss or damage,” the remaining policy provisions

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unambiguously excluded “alleged losses that are intangible or incorporeal.” 

Plaintiffs timely appealed. 

II.

We review a district court’s dismissal de novo. Stratta v. Roe, 961 F.3d 

340, 349 (5thCir. 2020). “Similarly, the interpretation of an insurance policy 

is a question of law that we review de novo.” Singleton v. Elephant Ins. Co., 

953 F.3d 334, 337 (5th Cir. 2020). “To defeat a Rule 12(b)(6) motion to 

dismiss, a plaintiff must plead enough facts to state a claim to relief that is 

plausible on its face.” Johnson v. BOKF Nat’l Ass’n, 15 F.4th 356, 361 (5th 

Cir. 2021) (quotations omitted). “The court accepts all well-pleaded facts as 

true, views them in the light most favorable to the plaintiff, and draws all 

reasonable inferences in the plaintiff’s favor.” Id.

III.

“In diversity cases, we apply the law of the forum state to determine 

which state’s law applies.” Mumblow v. Monroe Broad., Inc., 401 F.3d 616, 

620 (5th Cir. 2005). This action was brought in Louisiana, and “[u]nder 

Louisiana’s choice-of-law rules, the law of the state where the insurance 

contract was issued and executed generally governs the interpretation of that 

contract.” Pioneer Expl., L.L.C. v. Steadfast Ins. Co., 767 F.3d 503, 512 (5th 

Cir. 2014). 

The parties agree that, under Louisiana’s choice of law rules, “New 

York law likely applies.” But they also agree that “relevant New York and 

Louisiana law does not appear to conflict.” See Rainbow USA, Inc. v. Nutmeg 

Ins. Co., 612 F. Supp. 2d 716, 725–27 (E.D. La. 2009) (outlining how 

Louisiana and New York law are similar with respect to interpreting 

insurance contracts). 

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Our court has “held . . . that if the laws of the states do not conflict, 

then no choice-of-law analysis is necessary, and we simply apply the law of 

the forum state.” Pioneer Expl., 767 F.3d at 512 (cleaned up). “Because we 

conclude that the substantive contract law of New York and Louisiana is in 

harmony” on the determinative issues in this appeal, “no choice of law 

analysis is necessary, and we apply Louisiana law.” Mumblow, 401 F.3d at

621.

A.

The parties agree that the key question here is whether, under the 

policy, “direct physical loss or damage” requires corporeal or tangible loss 

or damage to the insured property. It is undisputed that the policy does not 

define “direct physical loss or damage,” and thus we must assess the

phrase’s “plain, ordinary and generally prevailing meaning.” Sims v. 

Mulhearn Funeral Home, Inc., 956 So. 2d 583, 589 (La. 2007). “When the 

words of an insurance contract are clear and explicit and lead to no absurd 

consequences, courts must enforce the contract as written and may make no 

further interpretation in search of the parties’ intent.” Gorman v. City of 

Opelousas, 148 So. 3d 888, 892 (La. 2014) (quotations omitted).

Plaintiffs contend that “direct physical loss or damage” encompasses 

“COVID-19 related issues” and “does not require physical damage.” But 

in Q Clothier New Orleans, L.L.C. v. Twin City Fire Insurance Co., we 

concluded that “the Louisiana Supreme Court would interpret ‘direct 

physical loss of or damage to property’ to cover only tangible alterations of, 

injuries to, and deprivations of property.” 29 F.4th 252, 257 (5th Cir. 2022). 

See also id. at 260 (“[W]e conclude the plain and ordinary meaning of 

‘physical loss of or damage to property’ is a tangible alteration to, injury to, 

or deprivation of property.”). Indeed, as we noted in Q Clothier, “every 

other circuit court to interpret this language” in the COVID-19 context has 

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understood it that same way. Id. at 259. See Terry Black’s Barbecue, L.L.C. v. 

State Auto. Mut. Ins. Co., 22 F.4th 450, 456–57 (5th Cir. 2022) (collecting 

cases).1

Still, Plaintiffs contend that, at least with respect to this policy,

construing “direct physical loss or damage” in such a manner would lead to 

“absurd results” in two respects. See Sher v. Lafayette Ins. Co., 988 So.2d 

186, 193 (La. 2008) (“An insurance policy should not be interpreted in an 

unreasonable or a strained manner . . . so as to achieve an absurd 

conclusion.”) (quotations omitted).

First, they note that “stock” is covered business personal property 

under the policy, with “stock” defined as the insured’s “interest in labor, 

materials, or services furnished or arranged by [the insured] on personal 

property of others.” Yet to recover, there must be “direct physical loss or 

damage,” and if that means actual physical damage, Plaintiffs contend it 

would be impossible for any of “the non-physical items of stock 

contemplated by the policy” to be covered. 

We disagree. Plaintiffs overlook that such intangible interests are 

covered under their policy only when they are “on [the] personal property of 

others.” Thus, as the district court observed, the policy simply “covers the 

value of services embedded in someone else’s property if that property is 

physically lost or damaged.” This by no means makes it impossible for the 

intangible interests contemplated by the policy to be covered. For instance, 

the district court noted that “damage to a stadium before a show sponsored 

1 We also note that New York courts have “uniformly . . . den[ied] coverage under 

similar insurance provisions where the insured property itself was not alleged or shown to 

have suffered direct physical loss or physical damage.” 10012 Holdings, Inc. v. Sentinel Ins. 

Co., Ltd., 21 F.4th 216, 221 (2nd Cir. 2021) (collecting cases).

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by Plaintiffs might result in coverage of the value of services done by 

Plaintiffs’ agents prior to the show.” 

Second, Plaintiffs contend that, under this definition of “direct 

physical loss or damage,” coverage under the policy’s communicable disease 

coverage provision would be “invalidate[d] . . . in all events” because it 

would only apply when the property “has gone through a distinct, 

demonstrable physical alteration.” But Plaintiffs are mistaken. Unlike many 

of the policy’s other coverage provisions, “direct physical loss or damage” 

is not what triggers communicable disease coverage. Instead, it is the 

occurrence of a “communicable disease event” under the policy. Once such 

an event occurs, the insured can recover for, among other things, the 

“necessary costs incurred to . . . [m]itigate, contain, remediate, clean, 

detoxify, [and] disinfect” the property. 

B.

Plaintiffs contend that, even if “direct physical loss or damage” 

requires that there be a corporeal effect on the property, their claim for 

coverage survives because they’ve alleged that their property was physically 

damaged by COVID-19. More specifically, Plaintiffs emphasize their 

allegation that they “lost valuable merchandise, business records, and the 

property of certain clients as a result of COVID-19 contamination.” 

But Plaintiffs’ complaint is devoid of allegations explaining how this 

property was—or could be—“lost” due to “COVID-19 contamination.” 

See Kelson v. Clark, 1 F.4th 411, 416 (5th Cir. 2021) (“[W]e do not presume 

to be true . . . ‘naked assertions devoid of further factual enhancement.’”) 

(quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). Moreover, as one of our 

sister circuits has observed, COVID-19 is “a virus that injures people, not 

property.” Santo’s Italian Café LLC v. Acuity Ins. Co., 15 F.4th 398, 403 (6th 

Cir. 2021). See Iqbal, 556 U.S. at 679 (“Determining whether a complaint 

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states a plausible claim for relief . . . requires the reviewing court to draw on 

its judicial experience and common sense.”).2 As such, Plaintiffs have not

plausibly alleged that they are entitled to coverage under the provisions 

requiring “direct physical loss or damage.”

C.

Nevertheless, Plaintiffs assert that they are entitled to coverage 

pursuant to their policy’s communicable disease coverage provision. As we 

have noted, unlike the other relevant policy provisions, communicable 

disease coverage is not triggered by “direct physical loss or damage.” 

Rather, the existence of a “communicable disease event” under the policy is 

what unlocks coverage. Once such an event occurs, the insured can recover 

“for direct physical loss or damage” that is “caused by or resulting from [the]

covered communicable disease event.” This includes the “necessary costs 

incurred to” (1) “[t]ear out and replace” property “in order to gain access 

to the communicable disease;” (2) “[r]epair or rebuild” property that “has 

been damaged or destroyed by the communicable disease;” and (3) 

“[m]itigate, contain, remediate, clean, detoxify, disinfect, neutralize, 

2 Plaintiffs have clarified in their briefing, both before the district court and on 

appeal, that this allegation in their complaint refers to “the required cleaning” of items 

contaminated with COVID-19. They offer as examples “a shrunken shirt after [its] first 

washing,” “a bumper sticker with curled edges due to” cleaning, and a cap that has “faded 

. . . due to the application of” a cleaning agent. But even if we were to credit this 

clarification, it would simply confirm that Plaintiffs have not “allege[d] that the virus

altered” their property directly. Sandy Point Dental, P.C. v. Cincinnati Ins. Co., 20 F.4th 

327, 335 (7th Cir. 2021) (noting COVID-19’s “impact on physical property is 

inconsequential” because the virus “may be wiped off surfaces using ordinary cleaning 

materials, and it disintegrates on its own in a matter of days”). This does not suffice under 

Plaintiffs’ policy, which largely “requires direct physical loss or damage” for there to be 

coverage. 

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cleanup, remove, dispose of, test for, monitor, and assess the effects [of] the 

communicable disease.” 

However, the policy defines a “communicable disease event” as “an 

event in which a public health authority has ordered that a location be 

evacuated, decontaminated, or disinfected due to the outbreak of a 

communicable disease at such location.” We agree with the district court 

that while “COVID-19 is undoubtedly a communicable disease within the 

meaning of the policy,” Plaintiffs have failed to allege the existence of a 

qualifying “communicable disease event.” 

Plaintiffs resist this conclusion. While they appear to acknowledge 

that there was not “an order specific to the insured[] location,” they stress

that, because of the pandemic, various “[s]tate and local government 

authorities” imposed “restrictions on business operations” and restricted 

“access to their offices.” 

But that is not enough. Again, for there to be coverage under this 

provision, “a public health authority [must] order[] that a location be 

evacuated, decontaminated, or disinfected due to the outbreak of a 

communicable disease at such location.” Plaintiffs have not alleged that any 

public health order mandated that their premises “be evacuated, 

decontaminated, or disinfected,” let alone that such an order was issued due 

to an “outbreak” at any of their offices. Accordingly, Plaintiffs have failed to 

plausibly allege that they are entitled to communicable disease coverage 

under their policy. See Dakota Girls, LLC v. Philadelphia Indem. Ins. Co., 17 

F.4th 645, 651–52 (6th Cir. 2021)(reaching same conclusion in case involving 

a similar communicable disease coverage provision).

D.

That leaves Plaintiffs’ claim that Fireman’s Fund breached its duty of 

good faith and fair dealing under Louisiana Revised Statutes §§ 22:1973 and 

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22:1892 by denying coverage. But these provisions “do not provide a cause 

of action against an insurer absent a valid, underlying insurance claim.” Pelle 

v. Munos, 296 So. 3d 14, 25 (La. Ct. App. 2020). See Bayle v. Allstate Ins. Co., 

615 F.3d 350, 363 (5th Cir. 2010)(noting that, under Louisiana law, “[b]reach

of contract is a condition precedent to recovery for the breach of the duty of 

good faith”). Because Plaintiffs have failed to plausibly allege that they are 

entitled to coverage, “the district court properly denied [their] claim for 

statutory penalties.” See Bayle, 615 F.3d at 363.

* * *

For the foregoing reasons, we affirm the judgment of the district court.

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