Like the Sandy Point insureds, Rosebud has “alleged neither a physical alteration to property nor an access- or use-deprivation so substantial as to constitute a physical dispossession.” Sandy Point, 20 F.4th at 337; see also Paradigm Care & Enrichment Ctr., LLC v. W. Bend Mut. Ins. Co., 33 F.4th 417, 421 (7th Cir. 2022) (“Absent such alteration, direct physical loss occurs only when a risk causes ‘complete physical dispossession of property,' and the COVID-19 virus does not. “); E. Coast Ent. of Durham, LLC v. Houston Cas. Co., 31 F.4th 547, 550 (7th Cir. 2022) (“[M]ere loss of use due to COVID-related closures
In previous cases, we have concluded under Illinois and Michigan law that businesses forced to shut down or reduce operations during the pandemic failed to allege "direct physical loss" or "direct physical damage" to property. E.g., Paradigm Care & Enrichment Center, LLC v. West Bend Mutual Insurance Co. , 33 F.4th 417 (7th Cir. 2022) (Illinois and Michigan law); Sandy Point Dental, P.C. v. Cincinnati Insurance Co. , 20 F.4th 327 (7th Cir. 2021) (Illinois law). Here, we reach the same conclusion under Indiana law, in accord with the only Indiana appellate opinion directly on point.
(quoting Valley Forge Ins. Co. v. Swiderski Elecs., Inc., 860 N.E.2d 307, 314 (Ill. 2006)). If the policy language is clear and unambiguous, the words in the policy “must be given their plain, ordinary, and popular meaning.” Paradigm Care & Enrichment Ctr., LLC v. W. Bend Mut. Ins. Co., 33 F.4th 417, 420 (7th Cir. 2022) (citation omitted). Language is not ambiguous merely because the parties contest a term's meaning; rather, “policy language must be subject to more than one reasonable interpretation before it is deemed ambiguous.” Id.
Under Illinois law, we construe insurance policies "'as a whole, giving effect to every provision if possible.'" Paradigm Care & Enrichment Center, LLC v. West Bend Mutual Insurance Company, 33 F.4th 417, 420 (7th Cir. 2022) quoting Sandy Point Dental v. Cincinnati Insurance Co., 20 F.4th 327, 331 (7th Cir. 2021). Clear and unambiguous words are given their plain and ordinary meaning, but genuine ambiguity is resolved in the insured's favor.
This court reviews the grant of a motion to dismiss for failure to state a claim de novo. Paradigm Care & Enrichment Ctr., LLC v. W. Bend Mut. Ins. Co., 33 F.4th 417, 420 (7th Cir. 2022).
Defendants' other arguments to the contrary are not persuasive. The Seventh Circuit's decision in Paradigm Care & Enrichment Center, LLC v. West Bend Mutual Insurance Company, 33 F.4th 417 (7th Cir. 2022), on which Defendants heavily rely, see Motion at 6-8, is distinguishable. The policy language at issue in that case “cover[ed] lost income and extra expenses if a government entity shuts down business operations ‘due to an outbreak' of a communicable disease ‘at the insured premises.'” Paradigm Care & Enrichment Ctr., 33 F.4th at 422 (emphasis added).
Most courts to address communicable disease coverage for statewide or citywide COVID-19 closure orders issued to stem the spread of COVID-19 have likewise found no coverage for losses sustained as a result of those orders. For instance, in Paradigm Care & Enrichment Center, LLC v. West Bend Mutual Insurance Co., 33 F.4th 417, 422 (7th Cir. 2022), the Seventh Circuit affirmed a Rule 12(b)(6) dismissal of a claim involving a communicable disease coverage provision similar to that involved in this case. In Paradigm, the provision covered lost income and extra expense when a government entity shuts down or suspends business operations “due to an outbreak of a communicable disease . . . at the insured premises.”
As to the first theory, the Seventh Circuit has repeatedly held that “mere loss of use due to COVID-related closures does not constitute ‘direct physical loss' when unaccompanied by any physical alteration to property.” E. Coast Ent. of Durham, LLC v. Houston Cas. Co., 31 F.4th 547, 550 (7th Cir. 2022); see Sandy Point Dental, P.C. v. Cincinnati Ins. Co., 20 F.4th 327, 334 (7th Cir. 2021) (“Without any physical alteration to accompany it, ... partial loss of use does not amount to a ‘direct physical loss.'”); Paradigm Care & Enrichment Ctr., LLC v. W. Bend Mut. Ins. Co., 33 F.4th 417, 421 (7th Cir. 2022) (“We held with respect to Illinois law that the phrase ‘direct physical loss' in a commercial property insurance policy requires a physical alteration to property-that is, some alteration in appearance, shape, color or other material dimension.”) (internal quotation and alteration marks omitted); see also Windy City Limousine Co., LLC v. Cincinnati Fin. Corp., 2022 WL 1965903, at *1 (7th Cir. June 6, 2022)
In Sandy Point Dental and other cases, we have held repeatedly that allegations of diminished use cannot amount to direct physical loss under a property insurance policy. See Sandy Point Dental, 20 F.4th at 334 ("Without any physical alteration to accompany it, .. partial loss of use does not amount to a 'direct physical loss.'"); Paradigm Care &Enrichment Center, LLC v. West Bend Mutual Insurance Co., 33 F.4th 417, 421 (7th Cir. 2022) ("We held with respect to Illinois law that the phrase 'direct physical loss' in a commercial property insurance policy requires a physical alteration to property-that is, some alteration in appearance, shape, color or other material dimension.") (internal quotation and alteration marks omitted).
We have reiterated that holding repeatedly in subsequent cases involving contracts from other states. See, e.g., Paradigm Care & Enrichment Center, LLC v. West Bend Mutual Insurance Co., 33 F.4th 417 (7th Cir. 2022); Crescent Plaza Hotel Owner, L.P. v. Zurich American Insurance Co., 20 F.4th 303 (7th Cir. 2021); Bradley Hotel Corp. v. Aspen Specialty Insurance Co., 19 F.4th 1002 (7th Cir. 2021); Circle Block, 44 F.4th 1014. Applying that standard to a claim based on pandemic-related restrictions, we held that the circumstances failed to allege direct physical damage or loss.