Summary
The Eighth Circuit affirmed dismissal of a dental clinic's breach of contract claim seeking COVID-19 business interruption coverage under Arkansas law. The court held that the policy's definition of "loss" as "accidental physical loss or accidental physical damage" requires physical alteration, contamination, or destruction of property, and that conclusory allegations of COVID-19 presence or loss of use without physical alteration are insufficient. The court also rejected civil authority coverage claims because the complaint failed to allege physical damage to properties other than the insured's clinics.
Topics
Practice areas
Questions Presented
- Whether Rock Dental's complaint stated a claim for coverage under the Business Income provision of the insurance policy.
- Whether Rock Dental's complaint stated a claim for coverage under the Civil Authority provision.
Holdings
- The Business Income coverage requires direct physical loss or damage to property, and mere loss of use without physical alteration is insufficient.
- Civil Authority coverage requires allegations of physical loss or damage to properties other than the insured's premises, which Rock Dental did not allege.
Key quotations
“some physicality to the loss or damage of property—e.g., a physical alteration, physical contamination, or physical destruction.” (at 1144)
“Threadbare recital of the policy's language, combined with conclusory statements” (at 678)
“policy cannot reasonably be interpreted to cover mere loss of use when the insured's property has suffered no physical loss or damage” (at 1144)
“We will pay for the actual loss of "Business Income" . . . you sustain due to the necessary "suspension" of your "operations" during the "period of restoration". The "suspension" must be caused by direct "loss" to property at a "premises" caused by or resulting from any Covered Cause of Loss.” (at 2-3)
“accidental physical loss or accidental physical damage” (at 3)
Factual background
Rock Dental operates dental clinics in Arkansas and Missouri. After the COVID-19 pandemic, Rock Dental's clinics were forced to suspend or reduce business operations due to COVID-19 and state/local orders mandating suspension of non-emergency services. Rock Dental sought coverage under its insurance policy with Cincinnati for business income loss and civil authority coverage. Cincinnati denied coverage, and Rock Dental sued for breach of contract.
Procedural history
The district court granted Cincinnati's motion to dismiss for failure to state a claim.