Insurance Coverage and Bad Faith

Eleventh Circuit Weighs Business Interruption Coverage for COVID Related Loss

Eleventh Circuit Weighs Business Interruption Coverage for COVID Related Loss

Trial courts have started to rule and appellate courts are now being asked to decide whether government closure orders enacted due to the COVID-19 pandemic cause restaurants “direct physical loss or damage to property” within the meaning of an all-risk insurance policy.  This issue is pending before the Eleventh Circuit Court of Appeals after the Southern District of Florida dismissed a Florida restaurant operator’s effort to bring a lawsuit against insurer Lloyd’s of London seeking coverage for COVID-19 related restaurant closures. 

In SA Palm Beach LLC v. Certain Underwriters at Lloyd’s, London, Plaintiff SA Palm Beach LLC (“Palm Beach”), the operator of a restaurant called “Sant Ambroeus Palm Beach” filed suit against Certain Underwriters at Lloyd’s London (“Lloyd’s London”). Palm Beach alleged “that as a direct result of the global COVID-19 pandemic and certain governmental orders that restricted restaurant operations, Plaintiff ‘has suffered a direct physical loss of [its] property’ because it has ‘been unable to use [its] property for its intended purpose.’”[1]  Palm Beach pointed to Executive Orders 20-68, 20-70, 20-71 and 20-89 issued by Florida Governor Ron DeSantis in March of 2020.[2]  In sum, these orders restricted dining inside bars and restaurants in Broward and Palm Beach Counties.  Palm Beach alleged as a result of the aforementioned Executive Orders, it “lost the physical use of its property” and was forced to restrict and/or cease business operations.[3]  According to Palm Beach, these government-mandated business interruptions caused Palm Beach to suffer “a direct loss to the property in the form of diminished value, lost business income, and forced physical alteration’s during a period of restoration.”[4]

Lloyd’s London provided Palm Beach with a commercial property insurance policy that included business interruption coverage.[5]  Additional coverage was provided for losses or expenses caused by actions taken by a “Civil Authority.”[6]  Lloyd’s London denied coverage for Palm Beach’s alleged losses because there was no actual physical damage.[7] 

Ultimately, the district court agreed with Lloyd’s London that Palm Beach’s Amended Complaint failed to “state a plausible claim that Plaintiff ha[d] suffered a ‘direct physical loss or damage’ as required to trigger coverage under the Policy.’”[8]  Further, Palm Beach’s Amended Complaint fell short of alleging physical damage to Plaintiff’s property.  The Amended Complaint did not allege that restaurant access was completely prohibited, as delivery and take-out services continued.[9]  As such, Plaintiff’s Amended Complaint was dismissed with prejudice.[10]

The district court’s decision was influenced by the Eleventh Circuit’s ruling in Mama Jo’s Inc. v. Sparta Ins. Co., 823 F. App’x 868 (11th Cir. 2020) and the trial court rulings that followed.[11]  In Mama Jo’s, the Eleventh Circuit had determined that the terms “‘direct’ and ‘physical’ modify loss and impose the requirement that the damage be actual.”[12]

Palm Beach appealed the district court’s dismissal of its claim to the U.S. Court of Appeals for the Eleventh Circuit, which is now pending.  Palm Beach argues that the district court’s ruling was contrary to Florida precedent, which states that “direct physical loss” “includes more than losses that harm the structure of the covered property.”[13]  Palm Beach also argues that the district court ignored the plain language of the policy, which says loss or damage.[14]  Palm Beach states that the district court’s ruling would cause “irreparable harm to Florida’s small business community already suffering from the pandemic’s impact.”[15]  Palm Beach has requested that the Court hold oral arguments on this matter. 


[1] SA Palm Beach LLC v. Certain Underwriters at Lloyd’s, London, No. 9:20-CV-80677-UU, 2020 WL 7251643, at *1 (S.D. Fla. Dec. 9, 2020).

[2] Id.

[3] SA Palm Beach LLC, No. 9:20-CV-80677-UU, 2020 WL 7251643, at *1.

[4] Id.

[5] Id.

[6] Id.

[7] Id.

[8] Id. at *3.

[9] Id. at *6.

[10] Id.

[11] See Malaube, LLC v. Greenwich Ins. Co., No. 20-22615, 2020 WL 5051581, at *1 (S.D. Fla. Aug. 26, 2020); Raymond H.Nahmad DDS PA v. Hartford Cas. Ins. Co., No. 20-CV-22833,___ F.Supp.3d ___, 2020 WL 6392841 (S.D. Fla. Nov. 2, 2020).

[12] Mama Jo’s, 823 F. App’x at 879.

[13] Appellant’s Br. 1.

[14] Appellant’s Br. 4.

[15] Appellant’s Br. v.