Rhonda Wilson v. USI Insurance Services LLC ( 2023 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 20-3124
____________
RHONDA H. WILSON; THE LAW OFFICES OF RHONDA
HILL WILSON, P.C.,
Appellants
v.
USI INSURANCE SERVICE LLC; HARTFORD
CASUALTY INSURANCE COMPANY
____________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 2:20-cv-03384)
District Judge: Honorable Eduardo C. Robreno
_____________
No. 20-3501
____________
TOPPERS SALON & HEALTH SPA, INC.,
Appellant
v.
TRAVELERS PROPERTY CASUALTY COMPANY OF
AMERICA
____________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 2:20-cv-03342)
District Judge: Honorable Joshua D. Wolson
_____________
No. 20-3594
_____________
4431, INC.; 4431 ASSOC., LP; 3354 WALBERT ASSOC.,
LP; 3354 WALBERT AVENUE ASSOCIATES, LLC;
BLUE GRILLE HOUSE AND WINE BAR; 4131
ASSOCIATES CANDLELIGHT INN; 2960 CENTER
VALLEY PARKWAY, LLC;
3739 WEST CHESTER PIKE, LLC; MELT RESTAURANT
GROUP, LLC; PAXOS RESTAURANTS, INC.; MELT
REAL ESTATE GROUP, LP; TOP CUT STEAKHOUSE,
Appellants
v.
CINCINNATI INSURANCE COMPANIES;
CINCINNATI INSURANCE COMPANY;
CINCINNATI CASUALTY COMPANY;
CINCINNATI INDEMNITY COMPANY
____________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
2
(D.C. No. 5:20-cv-04396)
District Judge: Honorable Joseph F. Leeson, Junior
_____________
No. 21-1038
_____________
LH DINING L.L.C., d/b/a River Twice Restaurant,
Appellant
v.
ADMIRAL INDEMNITY COMPANY
____________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 2:20-cv-01869)
District Judge: Honorable Timothy J. Savage
_____________
No. 21-1039
_____________
NEWCHOPS RESTAURANT COMCAST LLC,
d/b/a CHOPS,
Appellant
v.
ADMIRAL INDEMNITY COMPANY
____________
3
On Appeal from the District Court
for the Eastern District of Pennsylvania
(D.C. No 2:20-cv-01949)
District Judge: Honorable Timothy J. Savage
_____________
No. 21-1061
_____________
BOULEVARD CARROLL ENTERTAINMENT GROUP,
INC.,
Appellant
v.
FIREMAN’S FUND INSURANCE COMPANY
____________
On Appeal from the United States District Court
for the District of New Jersey
(D.C. No. 2:20-cv-11771)
District Judge: Honorable Susan D. Wigenton
______________
No. 21-1106
_____________
ADRIAN MOODY; ROBIN JONES,
d/b/a Moody Jones Gallery,
Appellants
v.
4
TWIN CITY FIRE INSURANCE COMPANY
____________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 2:20-cv-02856)
District Judge: Honorable Chad F. Kenney
_____________
No. 21-1107
_____________
ATCM OPTICAL, INC; OMEGA OPTICAL, INC;
OMEGA OPTICAL AT COMCAST CENTER LLC,
d/b/a OMEGA Optical,
Appellants
v.
TWIN CITY FIRE INSURANCE COMPANY
____________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 2:20-cv-04238)
District Judge: Honorable Chad F. Kenney
_____________
No. 21-1109
_____________
1 S.A.N.T., INC.,
Appellant
5
v.
NATIONAL FIRE & MARINE INSURANCE COMPANY
____________
On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. No. 2:20-cv-00862)
District Judge: Honorable William S. Stickman, IV
_____________
No. 21-1175
_____________
INDEPENDENCE RESTAURANT GROUP, LLC
on behalf of itself and all others similarly situated
d/b/a Independence Beer Garden,
Appellant
v.
CERTAIN UNDERWRITERS AT LLOYD’S, LONDON
____________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 2:20-cv-02365)
District Judge: Honorable Chad F. Kenney
_____________
No. 21-1240
_____________
6
ULTIMATE HEARING SOLUTIONS II, LLC;
ULTIMATE HEARING SOLUTIONS III, LLC;
ULTIMATE HEARING SOLUTIONS IV, LLC;
ULTIMATE HEARING SOLUTIONS V, LLC;
ULTIMATE HEARING SOLUTIONS VI, LLC,
Appellants
v.
TWIN CITY FIRE INSURANCE COMPANY
____________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 2:20-cv-02401)
District Judge: Honorable Chad F. Kenney
____________
No. 21-1294
_____________
WHISKEY FLATS INC.,
T/A Out of Wack Jack’s Bar & Grill,
Appellant
v.
AXIS INSURANCE COMPANY
____________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 2:20-cv-03451)
7
District Judge: Honorable Chad F. Kenney
_____________
No. 21-1315
____________
THE EYE CARE CENTER OF NEW JERSEY, PA, on
behalf of itself and all others similarly situated,
Appellant
v.
TWIN CITY FIRE INSURANCE COMPANY
____________
On Appeal from the United States District Court
for the District of New Jersey
(D.C. No. 2:20-cv-05743)
District Judge: Honorable Kevin McNulty
_____________
No. 21-1414
_____________
IN THE PARK SAVOY CATERERS LLC, t/a The Park
Savoy; IN THE PARK CHATEAU CATERERS LLC, on
behalf of itself and all others similarly situated,
Appellants
v.
SELECTIVE INSURANCE GROUP INC.; SELECTIVE
CASUALTY INSURANCE COMPANY
____________
8
On Appeal from the United States District Court
for the District of New Jersey
(D.C. No. 2:20-cv-06869)
District Judge: Honorable Madeline C. Arleo
____________
Argued: September 28, 2022
____________
Before: CHAGARES, Chief Judge, McKEE*, and PORTER,
Circuit Judges
(Opinion filed: January 6, 2023)
____________
Rhonda H. Wilson
8 Penn Center
1628 John F. Kennedy Boulevard, Suite 400
Philadelphia, PA 19103
Counsel for Appellants in No. 20-3124
Daniel J. Dugan [ARGUED]
Neal R. Troum
Spector Gadon Rosen & Vinci
1635 Market Street, 7th Floor
Philadelphia, PA 19103
Counsel for Appellant in No. 20-3501
Robert A. Freedberg
Christian M. Perrucci [ARGUED]
*
Judge McKee assumed senior status on October 21, 2022.
9
Florio Perrucci Steinhardt Cappelli Tipton & Taylor
91 Larry Holmes Drive, Suite 200
Easton, PA 18042
Counsel for Appellant in No. 20-3594
Walter J. Andrews [ARGUED]
Hunton Andrews Kurth
333 Southeast 2 Avenue, Suite 2400
Miami, FL 33131
Scott P. DeVries
Hunton Andrews Kurth
50 California Street, Suite 1700
San Francisco, CA 94111
Michael S. Levine
Hunton Andrews Kurth
2200 Pennsylvania Avenue, N.W.
Washington, DC 20037
Elbert Lin
Hunton Andrews Kurth
951 East Byrd Street
Riverfront Plaza, East Tower
Richmond, VA 23219
John R. Sawyer
Stark & Stark
993 Lenox Drive
Lawrenceville, NJ 08648
Kevin V. Small
10
Hunton Andrews Kurth
200 Park Avenue
52nd Floor
New York, NY 10166
Counsel for Appellant in No. 21-1061
Laurence S. Berman
Arnold Levin
Daniel C. Levin
Frederick S. Longer
Levin Sedran & Berman
510 Walnut Street, Suite 500
Philadelphia, PA 19106
Counsel for Appellants in Nos. 21-1106, 21-1107,
21-1038, 21-1039 & 21-1294
Kenneth J. Grunfeld
Golomb Spirt Grunfeld
1835 Market Street, Suite 2900
Philadelphia, PA 19103
Counsel for Appellants in Nos. 21-1106, 21-1107,
21-1294, 21-1038 & 21-1039
Richard M. Golomb
Golomb Spirt Grunfeld
1835 Market Street, Suite 2900
Philadelphia, PA 19103
Counsel for Appellants in Nos. 21-1038, 21-1039
& 21-1294
Wilson D. Miles, III
Rachel N. Minder
11
Beasley Allen Crow Methvin Portis & Miles
218 Commerce Street
Montgomery, AL 36104
Counsel for Appellant in 21-1294, 21-1106 & 21-1107
Paul W. Evans
Beasley Allen Crow Methvin Portis & Miles
218 Commerce Street
Montgomery, AL 36104
Counsel for Appellant in 21-1294
R. Bruce Carlson
Carlson Brown
222 Broad Street
P.O. Box 242
Sewickley, PA 15143
Ted A. Hages
Matthew Louik
James C. Martin [ARGUED]
Devin M. Misour
George L. Stewart, II
Colin E. Wrabley
Reed Smith
225 Fifth Avenue, Suite 1200
Pittsburgh, PA 15222
Kelly K. Iverson
Gary F. Lynch
Lynch Carpenter
1133 Penn Avenue, 5th Floor
Pittsburgh, PA 15222
Counsel for Appellant in No. 21-1109
12
Alan M. Feldman
Edward S. Goldis
Daniel J. Mann
Andrew K. Mitnick
Bethany R. Nikitenko
Feldman Shepherd Wohlgelernter Tanner Weinstock &
Dodig
1845 Walnut Street, 21st Floor
Philadelphia, PA 19103
James A. Francis
David A. Searles
John Soumilas
Francis Mailman Soumilas
1600 Market Street, Suite 2510
Philadelphia, PA 19103
Counsel for Appellant in No. 21-1175
Alan C. Milstein
Sherman Silverstein Kohl Rose & Podolsky
308 Harper Drive
Suite 200, Eastgate Corporate Center
Moorestown, NJ 08057
Counsel for Appellants in No. 21-1240
James E. Cecchi
Brian F. O’Toole [ARGUED]
Lindsey H. Taylor
Carella Byrne Cecchi Olstein Brody & Agnello
5 Becker Farm Road
Roseland, NJ 07068
Christopher A. Seeger
13
Seeger Weiss
55 Challenger Road, 6th Floor
Ridgefield Park, NJ 07660
Counsel for Appellants in Nos. 21-1414 & 21-1315
Paul J. Geller
Robbins Geller Rudman & Dowd
120 East Palmetto Park Road, Suite 500
Boca Raton, FL 33432
Samuel H. Rudman
Robbins Geller Rudman & Dowd
58 South Service Road, Suite 200
Melville, NY 11747
Counsel for Appellant in No. 21-1315
Bethany Barrese
Saxe Doernberger & Vita
233 Mount Airy Road
Basking Ridge, NJ 07920
Brian J. Clifford
Janie A. Eddy
Saxe Doernberger & Vita
35 Nutmeg Drive, Suite 140
Trumbull, CT 06611
Gregory D. Podolak
Saxe Doernberger & Vita
999 Vanderbilt Beach Road, Suite 603
Naples, FL 34108
Counsel for Amicus Appellant Saxe Doernberger
& Vita PC
14
Gabriel K. Gillett
Jenner & Block
353 North Clark Street, Suite 4500
Chicago, IL 60654
Counsel for Amici Appellants Pennsylvania Restaurant
& Lodging Association and Restaurant Law Center in
Nos. 20-3124, 21-1038, 21-1039, 21-1106, 21-1107,
21-1109, 21-1175, 21-1240 & 21-1294
Lisa M. Campisi
Blank Rome
1271 Avenue of the Americas
New York, NY 10020
Charles A. Fitzpatrick, IV
Blank Rome
130 North 18th Street
One Logan Square
Philadelphia, PA 19103
Counsel for Amicus Appellant United Policyholders
Nos. 21-1038, 21-1039, 21-1106, 21-1107, 21-1109 &
21-1294
Nicholas M. Insua
Reed Smith
599 Lexington Avenue, 22nd Floor
New York, NY 10022
Counsel for Amicus Appellant United Policyholders in
No. 21-1061
Christopher P. Leise
White & Williams
457 Haddonfield Road
15
Liberty View, Suite 400
Cherry Hill, NJ 08002
Marc L. Penchansky
White & Williams
1650 Market Street
One Liberty Place, Suite 1800
Philadelphia, PA 19103
Counsel for Appellee USI Insurance Services LLC in
No. 20-3124
Wystan M. Ackerman
J. Tyler Butts
Gregory P. Varga
Robinson & Cole
280 Trumbull Street
One Commercial Plaza
Hartford, CT 06103
Counsel for Appellee in No. 20-3501
Richard D. Gable, Jr.
Butler Weihmuller Katz Craig
1818 Market Street, Suite 2740
Philadelphia, PA 19103
Counsel for Appellee in Nos. 20-3501, 21-1106, 21-
1107 & Appellee Hartford Casualty Insurance
Company in No. 20-3124
Jonathan M. Freiman
David R. Roth [ARGUED]
Wiggin & Dana
One Century Tower
265 Church Street
16
New Haven, CT 06510
Counsel for Appellee in Nos. 21-1240, 21-1106, 21-
1107, 21-1315 & Appellee Hartford Casualty
Insurance Company in No. 20-3124
Sarah D. Gordon
Steptoe & Johnson
1330 Connecticut Avenue, N.W.
Washington, DC 20036
Counsel for Appellee in Nos. 21-1315, No. 21-1240,
21-1106, 21-1107 & Appellee Hartford Casualty
Insurance Company in No. 20-3124
James L. Brochin
Steptoe & Johnson
1114 Avenue of the Americas, 35th Floor
New York, NY 10036
Ryan M. Chabot
Alan E. Schoenfeld
Wilmer Cutler Pickering Hale & Dorr
7 World Trade Center
250 Greenwich Street
New York, NY 10007
Counsel for Appellee in No. 21-1315
John J. Kavanagh
Steptoe & Johnson
1330 Connecticut Avenue, N.W.
Washington, DC 20036
Counsel for Appellee in Nos. 21-1106, 21-1107, 21-
1240 & Appellee Hartford Casualty Insurance
Company in No. 20-3124
17
Caitlin R. Tharp
Steptoe & Johnson
1330 Connecticut Avenue, N.W.
Washington, DC 20036
Counsel for Appellee in No. 21-1240
Alan I. Becker
Daniel G. Litchfield
Laurence J. W. Tooth
Litchfield Cavo
303 West Madison Street, Suite 303
Chicago, IL 60606
Counsel for Appellees in No. 20-3594
Eric A. Fitzgerald
Hillary Ladov
McAngus Goudelock & Courie
P.O. Box 12519
Columbia, SC 29211
Antonia B. Ianniello
John F. O’Connor, Jr.
Steptoe & Johnson
1330 Connecticut Avenue, N.W.
Washington, DC 20036
Counsel for Appellees in Nos. 21-1038 & 21-1039
Michael D. Hynes
DLA Piper
1251 Avenue of the Americas, 27th Floor
New York, NY 10020
Brett D. Solberg
18
DLA Piper
845 Texas Avenue, Suite 3800
Houston, TX 77002
Counsel for Appellee in No. 21-1061
Robert L. Byer
Julie S. Greenberg
Duane Morris
625 Liberty Avenue, Suite 1000
Pittsburgh, PA 15222
Damon Vocke
Duane Morris
1540 Broadway
New York, NY 10036
Counsel for Appellee in No. 21-1109
Fred L. Alvarez
David E. Walker
Walker Wilcox Matousek
One North Franklin Street, Suite 3200
Chicago, IL 60606
Paul L. Fields, Jr.
Fields Howell
665 8th Street, N.W.
Atlanta, GA 30318
Marc R. Kamin
Michael J. Smith
Stewart Smith
300 Conshohocken State Road
300 Four Falls Corporate Center, Suite 670
West Conshohocken, PA 19428
19
Gregory L. Mast
Fields Howell
665 8th Street, N.W.
Atlanta, GA 30318
Counsel for Appellee in No. 21-1175
Michael E. DiFebbo, Jr.
Elizabeth A. Sutton
Kennedys CMK
1600 Market Street, Suite 1410
Philadelphia, PA 19103
Kristin V. Gallagher
Kennedys CMK
120 Mountain View Boulevard
P.O. Box 650
Basking Ridge, NJ 07920
Francis X. Simpson, III
Fowler Hirtzel McNulty & Spaulding
1717 Arch Street, Suite 1310
Philadelphia, PA 19103
Counsel for Appellee in 21-1294
Laura A. Brady
William T. Corbett, Jr.
Coughlin Midlige & Garland
350 Mount Kemble Avenue
P.O. Box 1917
Morristown, NJ 07962
Kenneth J. Brown
Amy M. Saharia
20
Williams & Connolly
680 Maine Avenue, S.W.
Washington, DC 20024
Counsel for Appellees in 21-1414
Laura A. Foggan
Crowell & Moring
1001 Pennsylvania Avenue, N.W.
Washington, DC 20004
Counsel for Amici Appellees American Property
Casualty Insurance Association and National
Association of Mutual Insurance Companies
_____________
OPINION OF THE COURT
_______________
CHAGARES, Chief Judge.
The plaintiffs in this consolidated appeal are businesses
(collectively, the “businesses”) that closed or significantly
limited their operations in March 2020 after the governors of
the states in which they operate issued orders to curb the spread
of the coronavirus and the disease it causes, COVID-19. To
recover the resultant losses, the businesses filed claims under
their respective commercial property insurance policies (the
“policies”). Their insurers universally denied coverage,
reasoning that the businesses did not suffer a “physical loss of
or damage to” property necessary to trigger coverage or that a
“virus exclusion” applied and barred coverage.
The businesses then filed lawsuits against their insurers
to enforce coverage, arguing that their loss of the ability to use
21
their properties for the properties’ intended business purposes
is a “physical loss of” property and that no exclusions bar
coverage, either because the exclusions do not apply or
because the insurers are estopped from arguing that they do.
The insurers filed dispositive motions, and the respective
District Courts all found for the insurers. The businesses
appealed.
We predict how the Supreme Courts of Pennsylvania
and New Jersey would decide the issues before us and hold that
the loss of use of a property’s intended business purpose is not
a physical loss of property covered by the businesses’
insurance policies. Because the policies do not cover the
businesses’ losses, we need not reach the issue of whether the
virus exclusions or any other exclusions apply. We will
therefore affirm the judgments and orders of the District
Courts.
I.
The plaintiffs are businesses in Pennsylvania, New
Jersey, New York, Maryland, and Delaware in the food
service, medical, health and wellness, art, music, and legal
sectors. In March 2020, to curb the spread of COVID-19, the
governors of each of those states issued executive orders
closing or restricting the activities of nonessential businesses
and urging people to stay home whenever possible (the
“closure orders”). The businesses were forced to close or
significantly limit their operations as a result. Restaurants had
to stop on-premises dining and bar service, while medical
providers could no longer perform non-emergent procedures.
Some businesses that were considered wholly nonessential,
such as fitness centers, had to close entirely.
22
To recover income lost as a result of the closure orders,
the businesses filed claims with their respective insurers under
their policies’ business income, extra expense, and civil
authority provisions. The business income provisions in the
policies provide coverage for “the actual loss of Business
Income” that the businesses sustain “due to the necessary
‘suspension’ of [their] ‘operations’ during the ‘period of
restoration,’” when the “suspension [is] caused by direct
physical loss of or damage to” the property and the loss or
damage is “caused by or resulting from a Covered Cause of
Loss.” Joint Consolidated Appendix (“J.A.”) 493, 1198, 1615,
2006, 2272, 2811; Appellees’ Supplemental App. (“S.A.”) 37;
Eye Care Joint Appendix (“E.C.J.A.”) 96. See also J.A. 887,
1865; Toppers Joint Appendix (“Toppers App.”) 55; In the
Park Joint Appendix (“I.P.J.A.”) 161, 351 (using materially
similar language).1 The extra expense provisions provide
coverage for extra expenses that the businesses “incur during
the ‘period of restoration’ that [they] would not have incurred
if there had been no direct physical loss or damage” to the
property, “caused by or resulting from a Covered Cause of
Loss.” J.A. 493–94, 887, 1865, 2006, 2811–12; Toppers App.
1
While the policies are not all identical, we discern no material
difference among them for the purpose of this dispute. For
example, all the policies tie business income and extra expense
coverage to the “period of restoration,” and the business
income provisions of all but two use identical “physical loss of
or damage to” language. The two policies that do not use this
language nevertheless also require physical loss, see Boulevard
Carroll Joint Appendix (“B.C.A.”) 65; 4431 Appendix (“4431
App.”) 108–09, 128, and the minor differences in wording
therefore do not change our analysis.
23
55–56. See also J.A. 1198–99, 1615, 2272–73; E.C.J.A. 96–
97; S.A. 37; B.C.A. 65; 4431 App. 109; I.P.J.A. 161, 351
(using materially similar language). And the civil authority
provisions cover losses caused when an “action of civil
authority [] prohibits access to” the insured property due to
physical loss or damage to property other than the insured
premises, caused by “a Covered Cause of Loss.” J.A. 494, 888,
1866, 2007, 2812; Toppers App. 56; 4431 App. 109. See also
J.A. 1199, 1616, 2273; S.A. 38; E.C.J.A. 97; B.C.A. 77;
I.P.J.A. 162, 352 (using materially similar language).2
The policies generally define covered cause of loss as
“risks of direct physical loss” not otherwise excluded or
limited. J.A. 505, 899, 1190, 1607, 1872, 1982, 2264; S.A. 29;
Toppers App. 66; E.C.J.A. 88. See also J.A. 2767; B.C.A. 111;
4431 App. 95; I.P.J.A. 150, 340 (using materially similar
language). The period of restoration is defined as the time
beginning “with the date of direct physical loss or [] damage”
and ending on the earlier of (1) the date when the property
“should be repaired, rebuilt or replaced with reasonable speed
and similar quality,” or (2) the date the business “is resumed at
a new, permanent location.” J.A. 1212–13, 1629–30, 2286–
87; S.A. 51–52; E.C.J.A. 110–11. See also J.A. 503, 897,
1871, 2013, 2819; B.C.A. 117; 4431 App. 128–29; Toppers
2
There is more variance among the civil authority provisions,
but each requires “physical loss,” damage, or “physical loss of
or damage to” another property and an action of civil authority
prohibiting access to the insured premises because of that loss
or damage. Because the businesses failed to allege or
demonstrate physical loss or damage to their or any other
properties, see infra Part III, those differences are immaterial
to the present dispute.
24
App. 64–65; I.P.J.A. 139–40, 329–30 (using materially similar
language, with some difference — immaterial to this dispute
— as to when the period of restoration starts).
Most of the policies also contain some form of a so-
called “virus exclusion” that excludes from coverage losses
caused by or relating to a virus. J.A. 516, 910, 1887, 2766;
Toppers App. 416; I.P.J.A. 136, 326; J.A. 293; 1284, 1703,
2367; E.C.J.A. 197; J.A. 2029, 2031; B.C.A. 66–67. Some
policies also exclude “loss or damage caused directly or
indirectly by . . . [t]he enforcement of any ordinance or law . .
. [r]egulating the construction, use or repair of any property”
(the “ordinance or law exclusion”). J.A. 45–46.
The insurers universally denied the businesses’ claims,
and the businesses filed lawsuits in New Jersey and
Pennsylvania courts to enforce coverage.3 The insurers filed
dispositive motions — to dismiss under Federal Rule of Civil
Procedure 12(b)(6), for judgment on the pleadings under Rule
12(c), or for summary judgment under Rule 56 — which were
granted by the District Courts. Most courts found that loss of
use was not a “physical loss of” property within the meaning
of the policies, 4431 App. 22–23; J.A. 91, 118, 138, 159–60,
182, 209–10; some reasoned that the policies required physical
damage to covered property, Toppers App. 646–47; B.C.A 5;
J.A. 44; and others found that even if there were coverage, a
virus exclusion barred the businesses’ claims, J.A. 22–24;
I.P.J.A. 6, E.C.J.A. 10. The businesses timely appealed. This
Court then consolidated these fourteen appeals, given the
similarities among them.
3
Most cases were initiated in federal court, while some were
initiated in state court and then removed to federal court.
25
II.
The District Courts had jurisdiction under 28 U.S.C. §
1332, and we have jurisdiction under 28 U.S.C. § 1291. We
review the District Courts’ grant of the insurers’ dispositive
motions de novo, Watters v. Bd. of Sch. Dirs. of City of
Scranton, 975 F.3d 406, 412 (3d Cir. 2020) (motion to
dismiss); Prusky v. Reliastar Life Ins. Co., 445 F.3d 695, 699
(3d Cir. 2006) (summary judgment); Allah v. Al-Hafeez, 226
F.3d 247, 249 (3d Cir. 2000) (judgment on the pleadings), and
may affirm on any ground supported by the record, Watters,
975 F.3d at 412. We also review de novo the District Courts’
interpretations of state law. Meyer v. CUNA Mut. Ins. Soc’y,
648 F.3d 154, 162 (3d Cir. 2011).
We apply the same standard to motions to dismiss and
for judgment on the pleadings, Wolfington v. Reconstructive
Orthopaedic Assocs. II PC, 935 F.3d 187, 195 (3d Cir. 2019):
“we accept the factual allegations in the complaint as true,
draw all reasonable inferences in favor of the plaintiff, and
assess whether the complaint and the exhibits attached to it
‘contain enough facts to state a claim to relief that is plausible
on its face,’” Watters, 975 F.3d at 412 (motion to dismiss)
(quoting Vorchheimer v. Philadelphian Owners Ass’n, 903
F.3d 100, 105 (3d Cir. 2018)); see also Allah, 226 F.3d at 249(judgment on the pleadings). We disregard legal conclusions
and recitals of the elements of a cause of action that are
supported only by mere conclusory statements. Oakwood
Lab’ys LLC v. Thanoo, 999 F.3d 892, 904 (3d Cir. 2021). In
reviewing a motion for summary judgment, we apply the same
standard as the District Court, “[d]rawing all reasonable
inferences in favor of the party against whom judgment is
sought” and affirming the grant of the motion “only when no
26
issues of material fact exist and the party for whom judgment
is entered is entitled to judgment as a matter of law.” Prusky,
445 F.3d at 699. Because the businesses’ claims arise under
state law, we predict how the Supreme Courts of Pennsylvania
and New Jersey would decide the issues before us.4 Koppers
Co. v. Aetna Cas. & Sur. Co., 98 F.3d 1440, 1445 (3d Cir.
1996).
III.
The businesses challenge the District Courts’ dismissals
of their complaints and grants of judgments on the pleadings
and summary judgment to the insurers. Central to this
challenge is whether the businesses’ inability to use their
properties for their intended business purposes constitutes
“physical loss of” property as that phrase is used in the policies.
Predicting how the Supreme Courts of Pennsylvania and New
Jersey would decide this issue and following our decision in
Port Authority of New York and New Jersey v. Affiliated FM
Insurance Company, 311 F.3d 226 (3d Cir. 2002), we hold that
it does not.
Under both Pennsylvania and New Jersey law, our role
in interpreting an insurance policy is to “ascertain the intent of
the parties as manifested by the language of the written
instrument.” Am. Auto. Ins. Co. v. Murray, 658 F.3d 311, 320
(3d Cir. 2011) (quotation marks omitted) (applying
Pennsylvania law); Manahawkin Convalescent v.
O’Neill, 85 A.3d 947, 958 (N.J. 2014). We read the policy as
a whole and in accordance with the plain and ordinary meaning
4
The parties agree that Pennsylvania and New Jersey law
applies to this appeal, as do we.
27
of its terms. Am. Auto. Ins. Co., 658 F.3d at 320; Cypress
Point Condo. Ass’n, Inc. v. Adria Towers, L.L.C., 143 A.3d
273, 280 (N.J. 2016).
Where the policy language is clear and unambiguous,
we must enforce that language as written. Am. Auto. Ins. Co.,
658 F.3d at 321; Cypress Point Condo. Ass’n, 143 A.3d at 280.
Language is ambiguous “if it is reasonably susceptible of
different constructions and capable of being understood in
more than one sense.” Hutchison v. Sunbeam Coal Corp., 519
A.2d 385, 390 (Pa. 1986); see also Cypress Point Condo.
Ass’n, 143 A.3d at 280. Ambiguous provisions in an insurance
policy must be construed in favor of the insured and against the
insurer. Med. Protective Co. v. Watkins, 198 F.3d 100, 104
(3d Cir. 1999) (applying Pennsylvania law); Flomerfelt v.
Cardiello, 997 A.2d 991, 996 (N.J. 2010). Whether policy
language is ambiguous “is not a question to be resolved in a
vacuum.” Madison Constr. Co. v. Harleysville Mut. Ins. Co.,
735 A.2d 100, 106 (Pa. 1999). Rather, terms of an insurance
policy are ambiguous “if they are subject to more than one
reasonable interpretation when applied to a particular set of
facts.” Id.; see also Cypress Point Condo. Ass’n, 143 A.3d at
280. Courts will not, however, “distort the meaning of the
language or resort to a strained contrivance in order to find an
ambiguity.” Madison Constr. Co., 735 A.2d at 106. And if
possible, “a court should interpret the policy so as to avoid
ambiguities and give effect to all of its provisions.” Am. Auto.
Ins. Co. Auto., 658 F.3d at 321.
To state a successful claim for coverage under an
insurance policy, an insured must first make a prima facie
showing that its claim falls within the policy’s grant of
coverage. See State Farm Fire & Cas. Co. v. Est. of Mehlman,
28
589 F.3d 105, 111 (3d Cir. 2009) (applying Pennsylvania law);
Hartford Accident & Indem. Co. v. Aetna Life & Cas. Ins. Co.,
483 A.2d 402, 408 (N.J. 1984). The insurer then bears the
burden to demonstrate that a policy exclusion applies. State
Farm Fire & Cas. Co., 589 F.3d at 111; Hartford Accident &
Indem. Co., 483 A.2d at 409. “[E]xclusions are always strictly
construed against the insurer and in favor of the insured.”
Nationwide Mut. Ins. Co. v. Cosenza, 258 F.3d 197, 206–07
(3d Cir. 2001) (applying Pennsylvania law); see also Villa v.
Short, 947 A.2d 1217, 1222 (N.J. 2008). If an exclusion
applies, the insured then bears the burden to show an exception
to that exclusion applies to restore coverage. Cypress Point
Condo. Ass’n, 143 A.3d at 286 (applying New Jersey law); N.
Ins. Co. of N.Y. v. Aardvark Assocs., Inc., 942 F.2d 189, 195
(3d Cir. 1991) (applying Pennsylvania law).
We begin our analysis, therefore, considering whether
the businesses demonstrated that their claims fall within the
policies’ grant of coverage, starting with the business income
and extra expense provisions.
A.
To establish coverage under the business income and
extra expense provisions,5 the businesses must show that their
operations were suspended because of “direct physical loss of
5
The policies’ extra expense provisions require “direct
physical loss or damage to property,” while the business
income provisions generally require “direct physical loss of or
damage to property.” Because we discern no material
difference between these two formulations, we analyze the
business income and extra expense provisions together.
29
or damage to” the properties. The businesses argue that the
loss of their ability to use their properties for their intended
business purposes constitutes “physical loss of” the properties.
We disagree.
1.
The policies do not define the phrase “physical loss of
or damage,” so we start with the plain meaning of the text.
Loss means the failure to keep or maintain possession or “the
state or fact of being destroyed.” Loss, MERRIAM WEBSTER-
UNABRIDGED DICTIONARY ONLINE,
https://unabridged.merriam-webster.com/unabridged/loss (last
visited Oct. 13, 2022); see also Loss, BLACK’S LAW
DICTIONARY (11th ed. 2019). Damage means “injury or harm
to . . . property.” Damage, MERRIAM WEBSTER-UNABRIDGED
DICTIONARY ONLINE, https://unabridged.merriam-
webster.com/unabridged/damage (last visited Oct. 13, 2022).
Under the plain language of the policies, the loss or damage
must be physical, which means “natural[,] tangible, concrete,”
Physical, OXFORD ENGLISH DICTIONARY ONLINE,
https://www.oed.com/view/Entry/143120?rskey=DAEbpp&re
sult=2#eid (last visited Oct. 13, 2022), and “[o]f or relating to,
or involving material things; pertaining to real, tangible
objects,” Physical, BLACK’S LAW DICTIONARY (11th ed.
2019).
Physical damage to property therefore typically means
“‘a distinct, demonstrable, and physical alteration’ of its
structure.” Port Auth. of N.Y. & N.J., 311 F.3d at 235 (quoting
10 Couch on Ins. § 148.46 (3d ed. 1998)). And physical loss
of property means a failure to maintain tangible possession of
the structure.
30
In Port Authority, however, we explained that
“[p]hysical damage to a building as an entity by sources
unnoticeable to the naked eye must meet a higher threshold.”
Id. We held that in the case of asbestos contamination,
physical loss or damage to property occurred
only if an actual release of asbestos fibers from
asbestos containing materials has resulted in
contamination of the property such that
its function is nearly eliminated or destroyed, or
the structure is made useless or uninhabitable, or
if there exists an imminent threat of the release
of a quantity of asbestos fibers that would cause
such loss of utility.
Id. at 236 (emphasis added).
We applied New Jersey and New York law in Port
Authority, but nothing unique about those states’ laws dictated
the result. For that reason, and because there is no substantive
law in Pennsylvania at odds with our decision, we predict that
the Supreme Court of Pennsylvania would adopt a similar
principle as Port Authority and hold that Port Authority applies
in a case where sources unnoticeable to the naked eye — here,
the coronavirus and resultant closure orders — have allegedly
reduced the use of the property to a substantial degree. This
standard ensures that an insured will have lost tangible
possession of property sufficient to constitute physical loss or
damage. The businesses therefore must show that the
functionalities of their properties were nearly eliminated or
destroyed, that the structures were made useless or
31
uninhabitable, or that there was an imminent risk of either of
those things happening.
The businesses argue that their loss of the ability to use
their properties for their intended business purposes meets this
standard. We disagree. The businesses’ argument is
completely divorced from the physical condition of the
premises. The businesses lost the ability to use their properties
for their intended business purposes because the governors of
the states in which they operate issued orders closing or
limiting the activities of nonessential businesses, not because
there was anything wrong with their properties. The properties
were not destroyed in whole or in part; their structures
remained intact and functional.
Regardless, the loss of the ability to use property in
certain ways does not render the properties useless or
uninhabitable. The properties could certainly be used or
inhabited, just not in the way the businesses would have liked.
Restaurants remained open for carry out, and medical
providers could perform emergency procedures. While we
recognize that some wholly nonessential businesses, such as
Toppers Salon & Health Spa, Inc. (“Toppers”), had to close
entirely for a time, again, that closure and resultant loss of use
was due entirely to the closure orders and had nothing to do
with the physical condition of the premises. No one was
“physically restrained” from entering the businesses’
properties, as counsel for Toppers suggested during oral
argument. The closure orders simply prohibited the businesses
from using their properties in certain ways.
At bottom, loss of use caused by government edict and
untethered to the physical condition of the premises is not a
32
physical loss or damage to the properties. We therefore hold
that loss of use of intended purpose under the circumstances
presented here is not a physical loss of property within the
meaning of the policies.6
Other terms in the policies support our conclusion that
loss of use must involve some physicality. For instance,
6
We consider this appeal entirely on its own merits but note
that every other Court of Appeals and all but one state supreme
court to have considered this issue also has held that loss of use
caused by closure orders issued in response to the COVID-19
pandemic does not constitute physical loss or damage
sufficient to trigger property insurance coverage. See Legal
Sea Foods, LLC v. Strathmore Ins. Co., 36 F.4th 29 (1st Cir.
2022); 10012 Holdings, Inc. v. Sentinel Ins. Co., 21 F.4th 216(2d Cir. 2021); Uncork & Create LLC v. Cincinnati Ins. Co.,
27 F.4th 926 (4th Cir. 2022); Terry Black’s Barbecue, L.L.C.
v. State Auto. Mut. Ins. Co., 22 F.4th 450 (5th Cir. 2022);
Santo’s Italian Café LLC v. Acuity Ins. Co., 15 F.4th 398 (6th
Cir. 2021); Sandy Point Dental, P.C. v. Cincinnati Ins. Co., 20
F.4th 327 (7th Cir. 2021); Oral Surgeons, P.C. v. Cincinnati
Ins. Co., 2 F.4th 1141 (8th Cir. 2021); Mudpie, Inc. v.
Travelers Cas. Ins. Co. of Am., 15 F.4th 885 (9th Cir. 2021);
Goodwill Indus. of Central Okla., Inc. v. Phila. Indem. Ins. Co.,
21 F.4th 704 (10th Cir. 2021); Gilreath Family & Cosmetic
Dentistry, Inc. v. Cincinnati Ins. Co., No. 21-11046, 2021 WL
3870697 (11th Cir. Aug. 31, 2021); Wakonda Club v. Selective
Ins. Co. of Am., 973 N.W.2d 545 (Iowa 2022); Tapestry, Inc.
v. Factory Mut. Ins. Co., No. 1 Sept. Term, 2022, 2022 WL
17685594 (Md. Dec. 15, 2022); Verveine Corp. v. Strathmore
Ins. Co., 184 N.E.3d 1266 (Mass. 2022); Neuro-Commc’n
Servs., Inc. v. Cincinnati Ins. Co., No. 2021-0130, 2020 WL
33coverage exists only during the “period of restoration,” which
ends when the property should be “repaired, rebuilt or
replaced” or is moved to a new location. As Toppers conceded
during oral argument, there is nothing to repair, rebuild, or
replace in any of these cases. The businesses’ loss of use
would be — and was — cured by an end to the closure orders,
and not by the rebuilding or repairing of any property. We
must read the policies as a whole and give effect to the whole
policy, including the “period of restoration” language. See
USX Corp. v. Liberty Mut. Ins. Co., 444 F.3d 192, 200 (3d Cir.
2006) (“Pennsylvania courts long have admonished that
‘contract terms will not be construed in such a manner so as to
render them meaningless,’ and we decline to do so here.”
(citation omitted)); Cypress Point Condo. Ass’n, 143 A.3d at
280 (“The court’s responsibility [under New Jersey law] is to
give effect to the whole policy, not just one part of it.”
(quotation marks omitted)). The businesses’ proposed
17573883 (Ohio Dec. 12, 2022); Cherokee Nation v.
Lexington Ins. Co., No. 119,359, 2022 WL 4138429 (Okla.
Sept. 13, 2022); Sullivan Mgmt., LLC v. Fireman’s Fund Ins.
Co., No. 2021-001209, 2022 WL 3221920 (S.C. Aug. 10,
2022); Hill & Stout, PLLC v. Mut. of Enumclaw Ins. Co., 515
P.3d 525 (Wash. 2022) (en banc); Colectivo Coffee Roasters,
Inc. v. Soc’y Ins., 974 N.W.2d 442 (Wis. 2022); but see
Huntington Ingalls Indus., Inc. v. Ace Am. Ins. Co., No. 2021-
173, 2022 WL 4396475, at *11 (Vt. Sept. 23, 2022) (holding
that a complaint that alleged COVID-19 adhered to and altered
property survived judgment on the pleadings under Vermont’s
“extremely liberal” pleading standard).
34
interpretation of physical loss or damage would render the
“period of restoration” language superfluous.
Recent decisions from the Superior Court of New
Jersey, Appellate Division, also support our conclusion that the
businesses did not suffer physical loss or damage. In three
cases like those before us, the Appellate Division determined
that loss of use caused by New Jersey’s closure orders did not
constitute physical loss or damage under commercial property
insurance policies. See Mac Prop. Grp. LLC & The Cake
Boutique LLC v. Selective Fire & Cas. Ins. Co., 278 A.3d 272(N.J. Super. Ct. App. Div. 2022); AC Ocean Walk, LLC v. Am.
Guarantee & Liab. Ins. Co., No. A-1824-21, 2022 WL
2254864 (N.J. Super. Ct. App. Div. June 23, 2022); Rockleigh
Country Club, LLC v. Hartford Ins. Grp., No. A-1826-21, 2022
WL 2204374 (N.J. Super. Ct. App. Div. June 21, 2022). Those
decisions are a strong indicator of how the Supreme Court of
New Jersey would decide the issues before us, see Edwards v.
HOVENSA, LLC, 497 F.3d 355, 361 (3d Cir. 2007), and
therefore reinforce our conclusion that there is no business
income or extra expense coverage here.7
7
The Superior Court of Pennsylvania has issued two decisions
addressing whether property insurance provides coverage for
losses incurred under circumstances similar to those here. The
court in MacMiles, LLC v. Erie Ins. Exch., No. 1100 WDA
2021, 2022 WL 17332910, at *4 (Pa. Super. Ct. Nov. 30,
2022), held that there was no coverage for loss of use of a
commercial property unaccompanied by any physical
alteration or other physical condition that rendered the property
unusable or uninhabitable. The same panel in Ungarean v.
CAN, Nos. 490 WDA 2021, 948 WDA 2021, 2022 WL
352.
The businesses make several counterarguments, none of
which are availing.
First, the businesses argue that because the policies
cover “physical loss of or damage to property,” loss must mean
something other than damage. We agree, but that does not
change our holding. There can be physical loss without
damage, such as the case of a landslide “leaving [a] home
standing on the edge of and partially overhanging a newly-
formed 30-foot cliff” without physically damaging the
structure itself, see Hughes v. Potomac Ins. Co. of D.C., 199
Cal. App. 2d 239, 243, 248–49 (Cal. Dist. Ct. App. 1962), or
“a portable grill or a delivery truck [being] stolen without a
scratch,” Santo’s Italian Café, 15 F.4th at 404. We also agree
17334365, at *4–5, *10–11 (Pa. Super. Ct. Nov. 30, 2022), in
contrast, determined that the policy at issue was ambiguous
and held that the policy covered the insured’s COVID-related
business losses. The differing outcomes make these decisions
a less useful measure in determining how the Supreme Court
of Pennsylvania would decide the issues before us, especially
because questions of insurance coverage are fact intensive
inquiries that depend on the specific language of a policy. See
Ungarean, 2022 WL 17334365, at *11; MacMiles, 2022 WL
17332910, at *8 (Panella, J. concurring). We nevertheless
have carefully reviewed the reasoning of both decisions and
predict that the Supreme Court of Pennsylvania, like the
overwhelming majority of state and federal jurisdictions that
have considered the issue, would determine that the policies
here are unambiguous and do not cover the businesses’ losses.
36
with the businesses that the definition of the term “loss” can
include loss of use. But it does not follow that every loss of
use is necessarily a physical loss, and for the reasons explained
above, there was no physical loss here.
One business, 1 S.A.N.T., Inc. (“1 S.A.N.T.”), argues
that under Port Authority, we must look to the functionality of
the properties and, to do that, we must look to the properties’
intended use.8 Our discussion of “utility” and “function” in
Port Authority, however, was in the context of discussing the
building or structure itself, not the purpose for which the
structure is used. See Port Auth. of N.Y. & N.J., 311 F.3d at
236 (explaining that loss requires that the “structure” be
rendered “uninhabitable and unusable”; that the “form or
quantity” of a contaminant must “make the building unusable”;
and that there is no loss when the “structure continues to
function.” (emphasis added)). When a structure’s function is
nearly eliminated or destroyed, or the property is rendered
uninhabitable or unusable, the building itself is rendered
completely (or almost completely) useless as a structure until
there is remediation or relocation. In other words, there is a
complete (or near complete) dispossession of property,
regardless of the purpose for which that property is used. This
operational utility is what we mean by functionality, not the
intended business purpose at or within a property that is
physically unaffected.
8
Along the same lines, 1 S.A.N.T. argues that we must
consider the businesses’ intended business purposes because it
is implicit in the policies. Our role, however, is to interpret the
language of the policies as written, and the businesses’
intended purposes is nowhere in the text.
37
Several businesses similarly argue that the actual or
suspected presence of the coronavirus on their premises
rendered the properties unsafe and uninhabitable, comparing
the coronavirus to contamination by noxious substances, such
as ammonia or gasoline, which courts have determined to be
covered under commercial insurance policies. Where courts
have found that such a substance caused physical loss or
damage, however, the substance was present to such a degree
that it became physically dangerous to be inside of the
building, rendering the building useless until there was some
kind of remediation. See Gregory Packaging, Inc. v. Travelers
Prop. Cas. Co. of Am., No. 2:12-cv-04418, 2014 WL 6675934,
at *6 (D.N.J. Nov. 25, 2014) (finding “physical loss of or
damage to” property where an ammonia release in a packaging
facility “physically transformed the air . . . so that it contained
an unsafe amount of ammonia or that the heightened ammonia
levels rendered the facility unfit for occupancy until the
ammonia could be dissipated”); W. Fire Ins. Co. v. First
Presbyterian Church, 437 P.2d 52, 55 (Colo. 1968) (holding
that an accumulation of gasoline around a church constituted a
“loss of use” when the building “became so infiltrated and
saturated” with gasoline that it became “uninhabitable”).
As we explained in Port Authority, the presence of a
dangerous substance alone does not constitute a loss; there is
no physical loss until the substance is “in such form or quantity
as to make the building unusable.” Port Auth. of N.Y. & N.J.,
311 F.3d at 236; see also Western Fire, 437 P.2d at 55
(“[T]here was no direct physical loss sustained on, for
example, the first day that gasoline actually seeped onto the
insured’s premises. To the contrary, no direct physical loss
was incurred by the insured until the [a]ccumulation of
gasoline under and around the church [b]uilt up to the point
38
that there was such infiltration and contamination of the
foundation, walls and rooms of the church building as to render
it uninhabitable and make the continued use thereof
dangerous.”). And here, no business alleged that the
coronavirus was present in its property in such a form or
quantity as to make the property dangerous and uninhabitable.
Even at its peak, buildings in which the coronavirus inevitably
amassed — such as hospitals and grocery stores — remained
open and inhabitable. Indeed, as the Ultimate Hearing
Solutions businesses9 acknowledge, whether the coronavirus
was present in their properties would have made no difference:
the closure orders applied to nonessential businesses across the
board, regardless of the presence of the virus on the businesses’
properties.10
9
The Ultimate Hearing businesses are Ultimate Hearing
Solutions II, LLC, Ultimate Hearing Solutions III, LLC,
Ultimate Hearing Solutions IV, LLC, Ultimate Hearing
Solutions V, LLC, and Ultimate Hearing Solutions VI, LLC.
10
Boulevard Carroll Entertainment Group, Inc. (“Boulevard
Carroll”), argues that its policy’s provision of communicable
disease coverage — which it concedes does not apply here —
necessarily means that a virus can cause damage. But whether
a virus can cause damage is a separate issue from whether the
coronavirus did cause damage here. No business, including
Boulevard Carroll, pled facts sufficient to suggest that it did.
At oral argument, Boulevard Carroll stated that it should have,
at least, been given leave to amend its complaint to correct any
pleading deficiencies. We need not reach this issue, however,
because Boulevard Carroll forfeited it. Boulevard Carroll did
not move for leave to amend before the District Court, and it
39
Toppers and 1 S.A.N.T. argue that we should ignore the
“period of restoration” language in the policies. They say,
respectively, that language is relevant only when coverage may
be prematurely terminated or when a repair is needed. But that
is not what the policies say. Rather, the policies provide that
the insurers “will pay for the [losses the businesses] sustain due
to the necessary ‘suspension’ of [their] ‘operations’ during the
‘period of restoration’.” J.A. 1865 (emphasis added); see also
Toppers App. 55 (using the same language). By providing
business income and extra expense coverage only during the
period of restoration, the plain language of the policies makes
the period of restoration language relevant to any business
income or extra expense claim. We must look to the text of the
policies and when that text is clear, as it is here, enforce that
language as written. Am. Auto. Ins. Co., 658 F.3d at 321;
Cypress Point Condo. Ass’n, 143 A.3d at 280. We therefore
must consider the period of restoration language.
Finally, the businesses argue that, at the very least, the
policy language is ambiguous. The Eye Care Center of New
Jersey, PA (“Eye Care”), and In The Park Savoy Caterers LLC
failed to develop the argument adequately in its opening brief.
See Barna v. Bd. of Sch. Dirs. of Panther Valley Sch. Dist., 877
F.3d 136, 145 (3d Cir. 2017) (“To be preserved, all arguments
must be supported specifically by ‘the reasons for them, with
citations to the authorities and parts of the record on which the
appellant relies.’ As a result, we have consistently refused to
consider ill-developed arguments or those not properly raised
and discussed in the appellate briefing.” (quoting Fed. R. App.
P. 28(a)(8)(A)); Doeblers’ Pa. Hybrids, Inc. v. Doebler, 442
F.3d 812, 821 n.10 (3d Cir. 2006) (noting that “passing and
conclusory statements do not preserve an issue for appeal”).
40
and In The Park Chateau Caterers LLC (together, “Park
Caterers”), in particular, argue that because some courts have
found physical loss or damage in purportedly similar
circumstances, the phrase “physical loss of or damage” must
be ambiguous. We are unconvinced. Pennsylvania law rejects
the idea that differing outcomes necessarily means that policy
language is ambiguous. See Madison Constr. Co., 735 A.2d at
106–08 (applying Pennsylvania law) (finding the definition of
“pollutant” “clear[] and unambiguous[]” despite “the wide
divergence of viewpoints among [] jurisdictions” on similar
issues); Lower Paxton Twp. v. U.S. Fid. & Guar. Co., 557 A.2d
393, 400 n.4 (Pa. Super. Ct. 1989) (“reject[ing]” the contention
that “where a provision in an insurance policy has been
construed in different ways by the various courts that have
considered it, this alone mandates that we find the provision
ambiguous”). And under New Jersey law, which governs Eye
Care’s and Park Caterers’ claims, there is no split in authority:
the Appellate Division has uniformly held that losses caused
by the closure orders are not physical losses. Under the facts
here, the policies unambiguously do not provide coverage
because there has been no physical loss or damage. To find
ambiguity in these cases would require us to “distort the
meaning of the [contractual] language or resort to a strained
contrivance” of the policies, see Madison Constr. Co., 735
A.2d at 106, which we decline to do.
For all these reasons, we hold that no business has met
its burden to show business income or extra expense coverage
under its respective policy.11
11
Toppers attempts to distinguish itself by arguing that it seeks
not coverage for lost profits but for continuing operating
expenses. But under Toppers’s policy, continuing operating
41
B.
Several businesses also seek civil authority coverage.12
To establish coverage under the civil authority provisions, the
businesses must demonstrate physical loss or damage to a
property other than the insured premises and that an action of
civil authority prohibited access to the insured premises
because of that loss or damage. The businesses have not met
either requirement.
No business alleged that a property other than the
insured premises was damaged or suffered a physical loss or
that an action of a civil authority prohibited access to the
insured premises because of loss or damage to another
property. Indeed, the closure orders were issued not in
response to property loss or damage but to mitigate health risks
to the public and slow the spread of COVID-19 by limiting
person-to-person exposure. Even more fundamentally, the
closure orders did not prohibit access to the businesses’
properties. The businesses remained physically accessible; the
closure orders merely prohibited certain uses of the buildings.
See Philadelphia Parking Auth. v. Fed. Ins. Co., 385 F. Supp.
2d 280, 289 (S.D.N.Y. 2005) (applying Pennsylvania law)
(finding no civil authority coverage where the civil authority
expenses are a part of business income and require physical
loss. Like the other businesses, Toppers has failed to show
physical loss; it therefore is not entitled to coverage for its
continuing operating expenses.
12
The businesses in Nos. 20-3124, 20-3594, 21-1038, 21-1039,
21-1106, 21-1107, 21-1109, 21-1175, 21-1240, and 21-1294
raise the issue of civil authority coverage on appeal.
42
grounded airplanes, which “may have temporarily obviated the
need for Plaintiff’s parking services” but “did not prohibit
access to Plaintiff’s garages and therefore c[ould] not be used
to invoke coverage under Plaintiff’s [insurance] policy”); see
also S. Hosp., Inc. v. Zurich Am. Ins. Co., 393 F.3d 1137, 1141
(10th Cir. 2004) (“We hold that the civil authority provision
does not apply because the FAA’s order grounding flights did
not itself prevent, bar, or hinder access to Southern
Hospitality’s hotels in a manner contemplated by the
policies.”).
For these reasons, we further hold that the businesses
have failed to establish civil authority coverage. The Court
empathizes with the difficulties that the businesses faced
during the pandemic. Our role, however, is to determine
whether the policies provide coverage for the businesses’
losses, and we conclude that there is no coverage under the
circumstances here. Because no business has demonstrated
coverage under its policy, it is unnecessary for us to determine
whether the insurers established that the virus or ordinance and
law exclusions bar coverage.13
13
Several of the Pennsylvania businesses ask us to certify
questions to the Supreme Court of Pennsylvania related to the
meaning of “physical loss of or damage” and the applicability
of the virus exclusions. We will deny those requests for
certification because they do not satisfy the factors set forth in
United States v. Defreitas, 29 F.4th 135, 141–43 (3d Cir.
2022).
43
IV.
For the foregoing reasons, we will affirm the judgments
and orders of the District Courts.
44