TJBC, Inc. v. Cincinnati Insurance Company ( 2021 )


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  •                               In the
    United States Court of Appeals
    For the Seventh Circuit
    ____________________
    No. 21-1186
    SANDY POINT DENTAL, P.C.,
    Plaintiff-Appellant,
    v.
    THE CINCINNATI INSURANCE COMPANY,
    Defendant-Appellee.
    ____________________
    Appeal from the United States District Court for the
    Northern District of Illinois, Eastern Division.
    No. 20 CV 2160 — Robert W. Gettleman, Judge.
    ____________________
    No. 21-1559
    THE BEND HOTEL DEVELOPMENT COMPANY, LLC,
    Plaintiff-Appellant,
    v.
    THE CINCINNATI INSURANCE COMPANY,
    Defendant-Appellee.
    2                                 Nos. 21-1186, 21-1559 & 21-1203
    ___________________
    Appeal from the United States District Court for the
    Northern District of Illinois, Eastern Division.
    No. 20 CV 4636 — Elaine E. Bucklo, Judge.
    ____________________
    No. 21-1203
    TJBC, INC.,
    Plaintiff-Appellant,
    v.
    THE CINCINNATI INSURANCE COMPANY,
    Defendant-Appellee.
    ____________________
    Appeal from the United States District Court for the
    Southern District of Illinois.
    No. 3:20-cv-00815-DWD — David W. Dugan, Judge.
    ____________________
    ARGUED SEPTEMBER 10, 2021 — DECIDED DECEMBER 9, 2021
    ____________________
    Before MANION, WOOD, and HAMILTON, Circuit Judges.
    WOOD, Circuit Judge. No one doubts that the COVID-19
    pandemic has inflicted enormous losses on businesses, large
    and small, throughout the country. It is therefore not sur-
    prising that an avalanche of insurance claims has followed in
    the wake of the pandemic, as the suffering businesses look
    for assistance in absorbing those losses. We resolve three
    such claims in this opinion—those brought by plaintiffs
    Nos. 21-1186, 21-1559 & 21-1203                               3
    Sandy Point Dental, P.C. (“Sandy Point”), the Bend Hotel
    Development Company (“Bend Hotel”), and TJBC, Inc.
    (“TJBC”). We refer to the plaintiffs collectively as the Busi-
    nesses unless the context requires otherwise.
    Each Business was required to close or dramatically scale
    back its operations in response to a series of executive orders
    issued by Illinois Governor J. B. Pritzker in an effort to curb
    the spread of the virus in the state. The Businesses held ma-
    terially identical commercial-property insurance policies,
    sold by the same insurer, the Cincinnati Insurance Company
    (“Cincinnati”). In brief, these policies provided coverage for
    income losses sustained on account of a suspension of opera-
    tions caused by “direct physical loss” to covered property.
    The policies also provided coverage for income losses sus-
    tained as a result of an action of civil authority prohibiting
    access to covered property, when such action was taken in
    response to “direct physical loss” suffered by other property.
    Each Business filed claims for coverage under its policy,
    and each time, Cincinnati denied the claim and litigation en-
    sued. In all three cases, the responsible district court granted
    Cincinnati’s motion to dismiss for failure to state a claim up-
    on which relief could be granted. See FED. R. CIV. P. 12(b)(6).
    Each court reasoned that the Business before it did not ade-
    quately allege that either the virus that causes COVID-19,
    SARS-CoV-2, or the resulting closure orders caused “direct
    physical loss” to property. All three Businesses appealed; we
    resolve those appeals in this consolidated opinion.
    Our review is de novo, but we find little to criticize in the
    district courts’ resolutions of these cases, and so we affirm
    the judgments of dismissal. In doing so, we join the four cir-
    cuits that so far have addressed the central question before
    4                              Nos. 21-1186, 21-1559 & 21-1203
    us: whether loss of use, unaccompanied by any physical al-
    teration to property, may constitute “direct physical loss”
    under the relevant insurance policies. See Santo’s Italian Café
    LLC v. Acuity Ins. Co., 
    15 F.4th 398
     (6th Cir. 2021); Oral Sur-
    geons, P.C. v. Cincinnati Ins. Co., 
    2 F.4th 1141
     (8th Cir. 2021);
    Mudpie, Inc. v. Travelers Cas. Ins. Co., 
    15 F.4th 885
     (9th Cir.
    2021); Gilreath Family & Cosmetic Dentistry, Inc. v. Cincinnati
    Ins. Co., --- F. App’x ---, 
    2021 WL 3870697
     (11th Cir. Aug. 31,
    2021).
    I
    On March 15, 2020, in response to the rapidly expanding
    COVID-19 pandemic, Governor Pritzker issued an order
    mandating the temporary closure to the public of restau-
    rants, bars, and movie theaters. Exec. Order No. 2020-07. On
    March 20, 2020, he issued another order, this time requiring
    all non-essential businesses to shut down partially and tem-
    porarily. Exec. Order No. 2020-10.
    As a result of these orders, Sandy Point, a private dental
    group, had to suspend the elective and routine dental
    services that make up 95% of its business, and limit its
    practice to emergency services. TJBC, which owns and
    operates two food and beverage establishments, was
    required to suspend in-person dining and limit its services to
    delivery and take-out. This lasted until June 26, 2020, when a
    superseding order permitted it to serve patrons in an
    outdoor setting, in parties of six persons or fewer, and in a
    socially distant manner.
    Bend Hotel’s allegations are less concrete, and so it is
    harder to tell what precisely these orders demanded of it. Its
    complaint alleges only that the first order “prohibited the
    Nos. 21-1186, 21-1559 & 21-1203                             5
    public from accessing [Bend Hotel’s] restaurants,” and that
    the second order “clos[ed] all ‘non-essential’ businesses in
    Illinois, including all restaurants … and much of hotel
    operations.” But as Cincinnati points out, although the
    orders prohibited in-person dining, they permitted delivery
    (including room service, in the case of a hotel) and take-
    away. The second order even designated hotels as essential
    businesses, “to the extent used for lodging and delivery or
    carry-out food services.” Exec. Order No. 2020-10, ¶ 12.v.
    Based on the complaint and text of the orders, which are
    official documents that have legal effect, and thus a proper
    subject of judicial notice, we proceed on the assumption that
    Bend Hotel did limit its restaurant services to delivery and
    take-out, and that its lodging services suffered from reduced
    capacity caused by restrictions on non-essential travel and
    social-distancing requirements.
    To recover the income losses occasioned by the closure
    orders, the Businesses turned to commercial property insur-
    ance policies sold to each of them by Cincinnati. The relevant
    provisions read as follows:
    SECTION A. COVERAGE.
    We will pay for direct “loss” to Covered Property at
    the “premises” caused by or resulting from any Cov-
    ered Cause of Loss. …
    (1) Business Income
    We will pay for the actual loss of “Business Income”
    and “Rental Value” you sustain due to the necessary
    “suspension” of your “operations” during the “period
    of restoration.” The “suspension” must be caused by
    direct physical “loss” to property at a “premises”
    6                            Nos. 21-1186, 21-1559 & 21-1203
    caused by or resulting from any Covered Cause of
    Loss. …
    (2) Extra Expense
    We will pay “Extra Expense” you incur during the
    “period of restoration”:
    (a) To avoid or minimize the “suspension” of
    business and to continue “operations” …
    (b) To minimize the “suspension” of business if
    you cannot continue “operations”. …
    (3) Civil Authority
    We will pay for the actual loss of “Business Income”
    you sustain and “Extra Expense” you incur caused by
    action of civil authority that prohibits access to the
    “premises” due to direct physical “loss” to property,
    other than at the “premises, caused by or resulting
    from any Covered Cause of Loss. …
    SECTION G. DEFINITIONS
    …
    9. “Loss” means accidental loss or damage.
    In other words, incorporating the stated definition of
    “loss,” the Businesses were covered for income losses result-
    ing from direct physical loss or direct physical damage to
    property. Thus, to survive Cincinnati’s Rule 12(b)(6) motion,
    they needed to allege that either the virus or the resulting
    closure orders caused direct physical loss or direct physical
    damage to covered property.
    Nos. 21-1186, 21-1559 & 21-1203                               7
    II
    Before addressing the question whether the Businesses
    adequately alleged “direct physical loss,” we first must de-
    termine what that phrase means under the Policy. We look
    to Illinois law for this purpose, because our subject-matter
    jurisdiction is based on diversity of citizenship, and the par-
    ties agree that Illinois supplies the rule of decision. Our task
    is to predict how the Supreme Court of Illinois would re-
    solve the issue. See Webber v. Butner, 
    923 F.3d 479
    , 482 (7th
    Cir. 2019).
    Under Illinois law, an insurance policy is to be construed
    as a whole, “giving effect to every provision, if possible, be-
    cause it must be assumed that every provision was intended
    to serve a purpose.” Valley Forge Ins. Co. v. Swiderski Elecs.,
    Inc., 
    860 N.E.2d 307
    , 314 (Ill. 2006). “If the words used in the
    policy are clear and unambiguous, they must be given their
    plain, ordinary, and popular meaning.” Cent. Ill. Light Co. v.
    Home Ins. Co., 
    821 N.E.2d 206
    , 213 (Ill. 2004). Furthermore,
    “[a] policy provision is not rendered ambiguous simply be-
    cause the parties disagree as to its meaning.” Founders Ins.
    Co. v. Munoz, 
    930 N.E.2d 999
    , 1004 (Ill. 2010). Rather, an am-
    biguity exists when the policy language is “subject to more
    than one reasonable interpretation.” Hobbs v. Hartford Ins.
    Co., 
    823 N.E.2d 561
    , 564 (Ill. 2005).
    No decision of the Illinois Supreme Court has addressed
    the precise policy language before us. But we are not entirely
    without guidance. In Travelers Ins. Co. v. Eljer Mfg., Inc., 
    757 N.E.2d 481
     (Ill. 2001), the state’s highest court addressed
    similar language, holding that “the term ‘physical injury’
    unambiguously connotes … an alteration in appearance,
    shape, color or in other material dimension.” 
    Id. at 502
    .
    8                              Nos. 21-1186, 21-1559 & 21-1203
    When interpreting “direct physical loss” in other cases in-
    volving coverage disputes over COVID-19-related losses,
    many courts have turned to this language from Travelers and
    concluded that the phrase “direct physical loss,” like the
    language in Travelers, requires a physical alteration to prop-
    erty. See, e.g., Paradigm Care & Enrichment Center, LLC v. West
    Bend Mutual Ins. Co., 
    529 F. Supp. 3d 927
    , 935 (E.D. Wis.
    2021) (“While Travelers does not interpret the exact phrase at
    issue in this case, the Court finds it likely that, pursuant to
    the Illinois Supreme Court’s interpretation of the terms
    ‘physical injury,’ Plaintiffs have not alleged ‘physical loss or
    damage to’ their covered premises.”). Cincinnati argues that
    this interpretation is correct, and the district courts in each of
    these appeals agreed with that position.
    The Businesses offer a competing (and more expansive)
    interpretation. “Direct physical loss,” they posit, captures
    not only physical alterations to property but also loss of use,
    even loss that is unaccompanied by any physical alteration.
    They point to two textual clues in support of this reading.
    First, they argue that the use of the disjunctive in the phrase
    “direct physical loss or damage” suggests that “loss” must
    mean something different from “damage,” lest the policy
    language be redundant. “Damage,” they suggest, refers to a
    physical alteration to property, while “loss” refers to the
    deprivation of use or possession. Second, the Businesses
    argue that the nature of the exclusions demonstrates that the
    Policy calls for an expansive understanding of “direct
    physical loss”—one that includes loss of use—and that the
    absence of a virus exclusion thus means that the loss of use
    they suffered from the executive orders, or from the virus, is
    covered under the Policy.
    Nos. 21-1186, 21-1559 & 21-1203                               9
    We have no quarrel with the idea that the disjunctive in-
    dicates that “loss” means something different from “dam-
    age.” See ANTONIN SCALIA & BRYAN GARNER, READING LAW:
    THE INTERPRETATION OF LEGAL TEXTS 174 (2012) (discussing
    the canon against surplusage). But the Businesses’ proposed
    distinction is neither the only possible reading nor a likely
    one. The phrase is “direct physical loss or damage.” The
    words “direct physical” are most sensibly read as modifying
    both “loss” and “damage.” But even if they can be divorced
    from “damage” (and we do not think that they can), they in-
    disputably modify “loss.” Any other interpretation would
    commit the same sin against which the Businesses caution
    us—namely making surplusage out of the word “physical.”
    Whatever “loss” means, it must be physical in nature. See
    Oral Surgeons, 2 F.4th at 1144 (“there must be some physicality
    to the loss or damage of property”) (emphasis added); see al-
    so Mudpie, Inc., 15 F.4th at 893 (favorably citing Oral Surgeons
    for the same proposition).
    Cincinnati proposes, and many courts have adopted, a
    reading that better accounts for both the disjunctive and the
    word “physical”: the word “loss” may refer to complete de-
    struction while “damage” connotes lesser harm that may be
    repaired. See, e.g., Crescent Plaza Hotel Owner L.P. v. Zurich
    American Ins. Co., 
    520 F. Supp. 3d 1066
    , 1069–70 (N.D. Ill.
    2021). But because the Businesses’ properties were neither
    destroyed nor damaged in a way that called for repairs, this
    option does not help them.
    The next textual argument presented by the Businesses is
    equally unavailing. They contend that if “direct physical
    loss” were limited to physical alterations to property, the
    Policy would have no reason expressly to exclude things
    10                            Nos. 21-1186, 21-1559 & 21-1203
    such as nuclear reactions, radiation, or radioactive contami-
    nation, which do not (they assume) cause physical altera-
    tions. Why mention a few non-physical possibilities if all of
    them are already excluded? The presence of these exclusions
    must mean, the Businesses argue, that “direct physical loss”
    is more capacious than Cincinnati is willing to admit. And
    because an exclusion for viruses is conspicuously absent
    from the Policy whose terms we are interpreting, it follows
    that the SARS-CoV-2 virus must not be excluded.
    The problem with this argument lies in its premise. Every
    exclusion to which the Businesses can point does involve
    something that causes a physical alteration to property. Take
    nuclear radiation, which the Businesses present as their
    clearest example. They contend that “[l]ike COVID-19,
    nuclear radiation exists in, but does not physically affect, the
    structure of a building.” But they present no basis for that
    assumption, and as a matter of fact, it appears to be
    incorrect. See H.K. HILSDORF ET AL., THE EFFECTS OF NUCLEAR
    RADIATION ON THE MECHANICAL PROPERTIES OF CONCRETE 226
    (1978) (reporting on the effects of radiation, including
    embrittlement, on the physical properties of concrete and
    other solids).
    But we need not wade into a debate about engineering or
    materials science. The Policy is replete with textual clues that
    reinforce the conclusion that “direct physical loss” requires a
    physical alteration to property. As Cincinnati points out, the
    Policy provides coverage for losses sustained during a “pe-
    riod of restoration,” which is defined by reference to “[t]he
    date [by which] the property … should be repaired, rebuilt, or
    replaced.” (Emphasis added.) Without a physical alteration to
    property, there would be nothing to repair, rebuild, or re-
    Nos. 21-1186, 21-1559 & 21-1203                                 11
    place. See Toppers Salon & Health Spa, Inc. v. Travelers Prop.
    Cas. Co., 
    503 F. Supp. 3d 251
    , 256–57 (E.D. Pa. 2020).
    It is thus no surprise that the overwhelming majority of
    courts, including the four circuits that have so far spoken on
    the issue, have adopted this interpretation of the relevant
    provisions. See, e.g., Santo’s Italian Café, 15 F.4th at 401–03;
    Oral Surgeons, 2 F.4th at 1144; Mudpie, Inc., 15 F.4th at 892;
    Gilreath, 
    2021 WL 3870697
    , at *2; Inns by Sea v. California
    Mutual Ins. Co., --- Cal. Rptr. 3d ---, 
    2021 WL 5298480
    , at *10
    (Cal. Ct. App. 2021). Only a small minority of district-court
    decisions have adopted the Businesses’ loss-of-use theory,
    and they have largely relied on the disjunctive-based
    argument that we already have considered and rejected. See,
    e.g., Studio 417, Inc. v. Cincinnati Ins. Co., 
    478 F. Supp. 3d 794
    ,
    800–01 (W.D. Mo. 2020); Blue Springs Dental Care, LLC v.
    Owners Ins. Co., 
    488 F. Supp. 3d 867
    , 873–74 (W.D. Mo. 2020).
    Finding little support from cases dealing directly with the
    coronavirus, the Businesses direct us to others involving
    termite infestations, asbestos, and gases. But these decisions
    are predicated on findings that the policyholders adequately
    alleged “direct physical loss” (or “physical injury,” the lan-
    guage at issue in the termite and asbestos cases), because
    property was physically altered.
    Posing v. Merit Ins. Co., 
    629 N.E.2d 1179
     (Ill. App. Ct.
    1994), illustrates the problem with these authorities. At issue
    there was whether termites, insects notorious for chewing
    through wood and compromising the structural integrity of
    buildings, created a “physical injury.” 
    Id. at 1184
    . Given that
    the reason termites pose a problem is that they physically
    alter property, it is difficult to see how this case helps the
    Businesses.
    12                              Nos. 21-1186, 21-1559 & 21-1203
    Similarly, the reasoning in the asbestos cases indicates
    that the courts deemed “physical injury” to be present be-
    cause asbestos causes a physical alteration to property, not
    because the asbestos leads only to loss of use. See United
    States Fidelity & Guaranty Co. v. Wilkin Insulation Co., 
    578 N.E.2d 926
    , 930–31 (Ill. 1991); Board of Education v. Int'l Ins.
    Co., 
    720 N.E.2d 622
    , 625–27 (Ill. App. Ct. 1999). Indeed, the
    court in Wilkin all but said as much: “[Insurers] contend that
    the presence of [asbestos] results only in intangible economic
    loss. … This court, however, has already found that asbestos
    fiber contamination constitutes physical injury to tangible
    property.” Wilkin, 
    578 N.E.2d at 931
     (citation omitted).
    The gas cases are a little closer to the mark, but they too
    fall short. Gas infiltration might cause loss of use without
    any accompanying physical alteration. And yet the courts in
    these cases found that the policyholders had sustained a “di-
    rect physical loss.” See Western Fire Ins. Co. v. First Presbyteri-
    an Church, 
    437 P.2d 52
    , 55 (Colo. 1968); Gregory Packaging,
    Inc. v. Travelers Property Cas. Co., Civ. No. 2:12-cv-04418
    (WHW) (CLW), 
    2014 WL 6675934
    , at *1 (D.N.J. Nov. 25,
    2014); Matzner v. Seaco Ins. Co., No. CIV. A. 96-0498-B, 
    1998 WL 566658
    , at *3 (Mass. Super. Ct. Aug. 12, 1998). This
    would seem to support the Businesses’ contention that “di-
    rect physical loss” includes loss of use, even when it is unac-
    companied by any physical alteration to property.
    But the gas infiltration in these cases led to more than a
    diminished ability to use the property. It was so severe that
    it led to complete dispossession—something easily charac-
    terized as a “direct physical loss.” In all three cases, the
    courts concluded that the contamination made the premises
    “uninhabitable,” Western Fire, 437 P.2d at 55; Matzner, 1998
    Nos. 21-1186, 21-1559 & 21-1203                               
    13 WL 566658
    , at *3; Gregory Packaging, 
    2014 WL 6675934
    , at *6,
    and “unfit for normal human occupancy,” Gregory Packaging,
    
    2014 WL 6675934
    , at *3. In other words, the gas infiltration
    made physical entry impossible, thus barring all uses by all
    persons.
    That distinguishes these cases from the three that are
    now before us, where—at most—the Businesses’ preferred
    use of the premises was partially limited, while other uses
    remained possible. Without any physical alteration to ac-
    company it, this partial loss of use does not amount to a “di-
    rect physical loss.” 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.” The gas cases
    present one such scenario: where gas infiltration renders a
    property completely uninhabitable, it has been physically
    lost in a meaningful sense, even if only temporarily.
    Harder questions arise if we tweak the facts slightly. As-
    sume that a tornado leaves debris around a building, but it is
    possible to clear a path through it, thereby allowing the
    owner of the business, the policyholder, to enter the premis-
    es to maintain them until operations may resume. Has the
    policyholder been effectively dispossessed of the property?
    What if the debris blocks all access to the primary commer-
    cial space but not to an adjacent manager’s office? No use
    may be made of the primary space, but productive uses re-
    main for the office space. Has the policyholder been physi-
    cally dispossessed of at least part of its property, such that it
    has alleged a “direct physical loss”?
    14                            Nos. 21-1186, 21-1559 & 21-1203
    We leave these questions for another day. We raise them
    only to emphasize that our holding rests on the facts and
    policy before us. This is enough to dispose of the common
    arguments the Businesses have raised. We now turn to their
    individual points.
    III
    A. Sandy Point
    In its amended complaint, Sandy Point makes only a sin-
    gle allegation explaining how it suffered a “direct physical
    loss.” This is what it said: “The continuous presence of the
    coronavirus on or around Plaintiff’[s] premises has rendered
    the premises unsafe and unfit for its intended use and there-
    fore caused physical property damage or loss under the Pol-
    icies.”
    We agree with the district court that this fails adequately
    to allege “direct physical loss.” Sandy Point does not even
    attempt to describe how either the presence of the virus or
    the resulting closure orders physically altered its property. It
    points only to the loss of the property’s “intended use.” As
    we have explained, this is not enough. Sandy Point may
    have been unable to put its property to its preferred (and, we
    assume, its most lucrative) use. But this is a far cry from the
    complete physical dispossession of property suffered by the
    policyholders in the gas-infiltration cases. Sandy Point at all
    times remained able to perform some dental work, and
    nothing precluded it from using the property for some other
    non-dental purpose consistent with the closure orders.
    We accept that these alternative uses would not have
    been equally, or even nearly, as satisfying to Sandy Point.
    But Sandy Point insured its property, not its ideal use of that
    Nos. 21-1186, 21-1559 & 21-1203                               15
    property. Having alleged neither a physical alteration to the
    property nor its equivalent in its amended complaint, Sandy
    Point failed adequately to allege a “direct physical loss” un-
    der the Policy.
    Sandy Point also appeals from the district court’s denial
    of its motion for leave to file a second amended complaint.
    The denial of such a motion is typically reviewed for an
    abuse of discretion, but “when the basis for denial is futili-
    ty,” as it seems to have been here, “we apply the legal suffi-
    ciency standard of Rule 12(b)(6) to determine whether the
    proposed amended complaint fails to state a claim. … Ac-
    cordingly, our review for abuse of discretion … includes de
    novo review of the legal basis for the futility.” Runnion v. Girl
    Scouts of Greater Chi. & Nw. Ind., 
    786 F.3d 510
    , 524 (7th Cir.
    2015) (citations omitted).
    Even under this standard of review, we fail to see how
    Sandy Point’s proposed new allegations would change the
    outcome. Sandy Point proposed to add the allegation that
    “COVID-19 physically attaches itself to the physical premis-
    es, and thereby deprive[s] plaintiff of the use of said premis-
    es.” It supported this contention with allegations regarding
    how the virus SARS-CoV-2 is “transmitted by air and sur-
    faces through water droplets, aerosols, and fomites.”
    But these allegations do not cure the deficiencies of the
    first amended complaint. Even if the virus was present and
    physically attached itself to Sandy Point’s premises, Sandy
    Point does not allege that the virus altered the physical struc-
    tures to which it attached, and there is no reason to think
    that it could have done so. While the impact of the virus on
    the world over the last year and a half can hardly be over-
    stated, its impact on physical property is inconsequential:
    16                            Nos. 21-1186, 21-1559 & 21-1203
    deadly or not, it may be wiped off surfaces using ordinary
    cleaning materials, and it disintegrates on its own in a matter
    of days. We thus find no reversible error in the district
    court’s denial of Sandy Point’s motion for leave to amend its
    complaint.
    Nor do we find an abuse of discretion in the district
    court’s decision to deny reconsideration of its orders. See
    O’Brien v. Village of Lincolnshire, 
    955 F.3d 616
    , 628 (7th Cir.
    2020) (“[w]e review a district court’s denial of a Rule 59(e)
    motion for reconsideration … for abuse of discretion.”).
    Sandy Point’s motion for reconsideration was premised on a
    single new district court decision that it characterized as a
    “change in the law” that warranted reconsideration. But that
    decision is non-binding, and in addition, it did no more than
    follow Studio 417, another district court decision that the dis-
    trict court had considered and rejected.
    B. Bend Hotel
    Bend Hotel’s complaint suffers from many of the same
    deficiencies as Sandy Point’s. Like Sandy Point, Bend Hotel
    alleges that “[t]he continuous presence of the coronavirus on
    or around Plaintiff’[s] premises has rendered the premises
    unsafe and unfit for its intended use and therefore caused
    physical property damage or loss under the Policies.” It fur-
    ther alleges that Governor Pritzker’s closure order “was
    made in direct response to the continued and increasing
    presence of the coronavirus on property or around Plaintiff’s
    premises.”
    Like Sandy Point, Bend Hotel has not alleged that the vi-
    rus (or the resulting closure orders) physically altered its
    property. It has alleged only that the physical presence of
    Nos. 21-1186, 21-1559 & 21-1203                              17
    SARS-CoV-2 on its property “rendered the premises … unfit
    for … its intended use.” But, like Sandy Point, Bend Hotel
    has not alleged loss of use so substantial as to amount to a
    physical dispossession of its property. Although its allega-
    tions are vague, we gather that at least some of its hotel op-
    erations remained usable and that, although in-person din-
    ing at the hotel restaurant was prohibited, room service and
    take-out were possible. As in Sandy Point’s case, this is a far
    cry from the complete physical dispossession of property
    suffered by the policyholders in the gas-infiltration cases.
    Bend Hotel thus has failed adequately to allege a “direct
    physical loss” to property.
    C. TJBC
    TJBC’s complaint made similar allegations and thus fares
    no better than the other two we have discussed. It alleged
    that “[SARS-CoV-2] droplets can … attach to surfaces” and
    that the virus “can survive on solid surfaces for significant
    periods of time [and] can be spread long distances through
    the air.” It further alleged that four different executive orders
    issued by Governor Pritzker limited its business operations
    to different degrees at different times. Some, for example,
    “prohibit[ed] … on-premises consumption of food and
    beverages and gatherings of more than 50 people”; others
    allowed it to re-open “but only for consumption off-
    premises, through such means as in-house delivery, third-
    party delivery, drive-through, curbside pick-up, and carry-
    out”; while yet others allowed it to “resume service for on-
    premises consumption” limited to “six persons or fewer …
    served outdoors and where each person in a party is
    distanced at least six feet away from any other person in any
    18                            Nos. 21-1186, 21-1559 & 21-1203
    other party.” All of these orders prohibited customers from
    using the inside premises of TJBC’s businesses.
    Like Sandy Point and Bend Hotel, TJBC did not initially
    allege that the SARS-CoV-2 virus physically altered its prop-
    erty, nor did it (or could it) allege that the resulting closure
    orders did so. During oral argument, and for the first time in
    the case, TJBC’s counsel shifted ground, arguing that the
    question is not whether the virus or the closure orders phys-
    ically altered the property, but rather whether they physically
    altered the premises, and that the premises include the air.
    Because the virus altered the air, counsel argued, it altered
    the premises. But even if the premises included the air, the
    Policy specifies what it covers: “direct physical ‘loss’ to Cov-
    ered Property at the ‘premises,’” not direct physical loss to
    the premises themselves. And in any event, neither the Poli-
    cy nor the dictionary suggest that the word “premises” in-
    cludes air. Instead, the Policy defines “premises” only as
    “the Location of Premises described in the Declarations,”
    which in turn include only a physical address. In short, even
    if we were to accept this last-minute change in emphasis, it
    would not change the result.
    Turning back to its complaint, TJBC alleged only a re-
    duced use of its property. It did not describe either a physi-
    cal alteration to property nor a physical dispossession (literal
    or approximate), and so it has failed adequately to allege a
    “direct physical loss.”
    IV
    To state a claim under the Policy before us, the Business-
    es needed to allege more than a partial loss of their preferred
    use of the insured properties. But they alleged neither a
    Nos. 21-1186, 21-1559 & 21-1203                            19
    physical alteration to property nor an access- or use-
    deprivation so substantial as to constitute a physical dispos-
    session. They thus have not managed to state claims upon
    which relief could be granted.
    Given this conclusion, we see no need to address the
    Businesses’ additional claims of consumer fraud, common-
    law fraud, or vexatious refusal of coverage. Cincinnati could
    not have been fraudulent or vexatious in denying coverage
    where adequate grounds for coverage did not exist in the
    first place.
    We AFFIRM the dismissals of all three cases, as well as the
    denials of Sandy Point’s motions for reconsideration and for
    leave to amend its complaint.