Iowa Issues 2nd State Supreme Court Ruling Finding No Coverage for COVID Income Loss

The Iowa Supreme Court on Friday ruled in two separate decisions that COVID-19 did not cause a physical loss or damage that would allow a private golf club or a restaurant and bar to recoup income lost during COVID-19 shutdown orders.

Iowa’s was the second state high court in the nation to close the door on COVID-related business interruption claims. Its unanimous decision followed a ruling released Thursday by the Massachusetts Supreme Judicial Court affirming dismissal of claims filed by three restaurants.

Robert Hartwig, a University of South Carolina economics professor and former director of the Insurance Information Institute, said “the writing was on the wall many months ago.” In addition to the high courts for Massachusetts and Iowa, 10 of the federal Circuit Courts and intermediate appellate courts in California, Illinois, Indiana, Michigan, New York and Ohio have ruled the SARS-CoV-2 virus does not cause a direct physical damage or loss to property, according to a litigation tracker maintained by the University of Pennsylvania’s Carey Law School.

“It’s long past time for the plaintiff’s bar to throw in the towel,” Hartwig said in an email. “Courts across the country have ruled on thousands of cases arising from businesses small and large in many different industries. The message the courts are sending are seldom this consistent or this clear. COVID did not result in physical loss or damage to covered property. Period. End of story.”

The Wakonda Club is a private member-owned golf and county club built in 1922 that boasts of panoramic views of the Des Moines skyline. The club shut down completely from March 17 to March 28, 2020 and restricted sales from its Tiki Bar and snack bar to carryout orders until May 22 because of state pandemic precautions.

The golf club filed a claim for lost income against its policy with Selective Insurance Co. of America, which was denied. Wakonda Club sued. Polk County District Court Judge Celene Gogerty granted summary judgment in favor of the insurer.

The Supreme Court affirmed, agreeing with Selective that the coronavirus pandemic did not cause any direct physical loss or damage that was covered by the club’s commercial property policy. The court never addressed whether a virus exclusion in the policy applied.

“The mere loss of use of property, without more, does not meet the requirement for a direct physical loss of property,” the opinion says.

Jesse’s Embers, which operates a bar and restaurant in Des Moines, filed a lawsuit after Farm Bureau Financial Services rejected its claim for business income lost during the March-to-May 2020 shutdown. Polk County District Court Judge Jeanie K. Vaudt granted summary judgment for the insurer, finding there was no physical loss or damage and if there were it would have been excluded under the policy language anyway.

The Supreme Court specifically rejected Jesse’s Embers’ argument that it was owed coverage under the civil authority provision of its policy.

“Our conclusion is reinforced by the numerous courts that have rejected civil authority claims where damage to adjacent properties was absent,” the opinion says.

The losing streak for plaintiff’s extended into the federal court system.

The 8th Circuit Court of Appeals on Friday affirmed a trial court’s summary judgment against a business-interruption claim filed against Intrepid Insurance Co. by two restaurants and a dental practice in St. Louis, Missouri.

The appellate panel ruled that under Missouri law, there was no physical loss or damage to the Monday’s Restaurants or the pediatric dental practice operated by Drs. Andrew Dill, Amy Varble and Michael Wong even though they were forced to temporarily restrict their operations.

The 8th Circuit has issued two similar rulings. It rejected a COVID-19 related business interruption claim filed by an oral surgery practice in Iowa and a travel insurance claim filed by a resident of Missouri.