On August 31, 2021, the Eleventh Circuit issued its first opinion addressing whether an insurer properly denied coverage for an insured's business interruption losses due to the COVID-19 pandemic and shelter-in place orders. Gilreath Family & Cosmetic Dentistry Inc. v. The Cincinnati Insurance Company (USCA11 Case: 21-11046). In Gilreath, the Court affirmed the Northern District of Georgia's ruling that the insured dental practice failed to show that it suffered a "direct physical loss" as required under the policy issued by Cincinnati.

The insured filed suit seeking coverage under the Business Income, Civil Authority and Extra Expense provisions of the policy. Each of these policy provisions hinged on a covered cause of loss being a "direct physical loss." The Eleventh Circuit agreed that the insured failed to allege "nothing that could qualify, to a layman or anyone else, as physical loss or damage." The court rejected the insured's argument that the possible presence of viral particles constituted physical damage or loss to the property. The court noted that while the shelter-in-place orders prevented the dental practice from conducted routine or elective procedures, the practice was still able to perform emergency procedures in its office. The appellate court followed a 2003 Georgia Court of Appeals' opinion in AFLAC Inc. v. Chubb & Sons, Inc., 260 Ga. App. 306 (2003) in which the court held that the "common meaning" of "direct physical loss or damage" requires there be "'an actual damage in insured property' that either makes the property 'unsatisfactory for future use' or requires 'that repairs be made.''' Id. at 308.

This week's opinion by the Eleventh Circuit is not a surprise. In August 2020, the appellate court cited the AFLAC opinion in its ruling in Mama Jo's Inc. v. Sparta Ins. Co., 823 F. App'x 86. While COVID-19 not an issue, construction on a road adjacent to the Mama Jo's restaurant, Berries, caused dust and debris to migrate into the restaurant. Id. at 871.The restaurant remained open, but the number of customers decreased, and the restaurant had to perform increased daily cleaning due to the construction dust and debris. Mama Jo sought coverage for its business interruption loss. The Eleventh Circuit confirmed the district court's ruling that under Florida law, Mama Jo's cleaning claim was not covered because property that must be cleaned is not damaged and therefore, there was no "direct physical loss."

The Eleventh Circuit joins the 8th Circuit Court of Appeals in ruling in favor of the insurer in a COVID-19 business interruption claims. See Oral Surgeons, P.C. v. The Cincinnati Insurance Company (USCA8 Case: 20-3211).

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