Opinion ID: 6316860
Heading Depth: 4
Heading Rank: 1

Heading: Loss to Plaintiffs’ Properties

Text: We have noted that a “‘threadbare recital[] of’ the contract’s language combined with ‘conclusory statements’ saying that the coronavirus impaired some unidentified property in some unidentified manner” is not sufficient to survive a motion to dismiss. Bridal Expressions LLC, v. Owners Ins. Co., No. 21-3381, 2021 WL 5575753, at  (6th Cir. Nov. 20, 2021) (per curiam) (alteration in original) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009)). Therefore, a sufficient complaint alleging that the COVID-19 virus itself damaged an insured property would likely, at a minimum: (1) include allegations that COVID-19 was present at the covered property; (2) include allegations that COVID-19 materially altered all or part of the property; and (3) seek specific damages “for replacing that property and only for the time that property was damaged or lost.” Id. Here, plaintiffs have failed to adequately allege facts that support a finding that the virus caused actual property loss or damage. The earlier-filed complaints in Brown Jug and Chelsea Ventures merely allege that COVID-19 caused tangible harm to individuals who entered affected restaurants, and subsequently became infected. These complaints also allege that COVID-19 caused economic harm to the businesses themselves because customers were unwilling or unable to patronize them. But neither complaint credibly alleges that the presence of COVID-19 in any way caused “direct physical loss of or damage to” a covered property, or that the virus “physically and directly altered . . . property” by its mere presence. See Santo’s, 15 F.4th at 402. The Brown Jug complaint comes closest, since one of its restaurants was the source of a COVID19 outbreak. Even still, at no point does Brown Jug explain how its property was lost or damaged by the virus in a manner that required it to suspend operations to “repair[], rebuil[d] or replace[]” it for any period of time—a requirement to recover under the insurance policy. The Dino Drop complaint is far more detailed. For one, it specifically alleges that “COVID-19 causes physical loss and damage by, among other things, destroying, distorting, corrupting, attaching to, and physically altering property, including its surfaces, and by rendering property unusable, uninhabitable, unfit for intended function, dangerous, and unsafe.” (Dino Drop, Second Amend. Compl., R. 14, PageID 1402–03.) The Dino Drop complaint alleges that when droplets containing the virus land on surfaces, they transform that which they touch into Nos. 21-2644/2715/2718 Brown Jug, et al. v. Cincinnati Ins. Co. Page 8 dangerous “fomites.” A “fomite” is an inanimate object (such as a countertop, dish, or doorknob) that may carry and spread infectious agents (such as bacteria or viruses). Fomite, Merriam-Webster Online Dictionary, https://www.merriam-webster.com/dictionary/fomite. However, upon closer examination, the Dino Drop complaint suffers from the same deficiencies as the complaints in Brown Jug and Chelsea Ventures—it does not actually allege that the property was harmed.3 Dino Drop alleges that several of its employees and customers tested positive for COVID-19, likely after exposure to the virus by a live band that played at one of its restaurants. This outbreak purportedly “damaged” the property, because Dino Drop had to take remediation measures, such as cleaning and reconfiguring spaces, to reduce the threat of COVID-19. These, however, are precisely the sorts of losses we have previously determined are “not tangible, physical losses, but economic losses.” Universal Image Prods., 475 F. App’x at 573; see also id. at 571 (concluding that “cleaning and moving expenses, lost (undamaged) improvements attached to [a] . . . building, as well as lost business income” are not recoverable tangible damages under Michigan insurance law). “This is not to say that no circumstances can exist under which a loss of use, unaccompanied by any physical alteration to property, might be so pervasive as effectively to qualify as a complete physical dispossession of property and thus a ‘direct physical loss.’” Sandy Point Dental, 20 F.4th at 334. Plaintiffs have just failed to plead them here. Plaintiffs’ factual allegations are the kind that are “merely consistent with a defendant’s liability,” and therefore insufficient to survive a motion to dismiss. Iqbal, 556 U.S. at 678 (quotations omitted). Because plaintiffs have failed to adequately allege “loss” to their property due to COVID-19, they “fail[] to plead sufficient facts to state a claim” for breach of contract under the Business Income and Extra Expenses provisions. Id. at 687. 3Thisconclusion does not apply to the claims related to an electrical fire that allegedly occurred in August 2020. The two counts pertaining to the fire were dismissed for lack of jurisdiction, as Dino Drop conceded they did not meet the amount in controversy necessary to sustain diversity jurisdiction. Dino Drop, 2021 WL 2529817 at . Nos. 21-2644/2715/2718 Brown Jug, et al. v. Cincinnati Ins. Co. Page 9