Court Denies Coverage in Another Covid-19 Case, This Time Under Georgia Law

Recognizing that every federal and state appellate court has held that the presence of Covid-19 does not cause direct physical harm to a business’s property, the Eleventh Circuit has held again—this time under Georgia law—that Covid-related expenses and losses are not covered by a business insurance policy.

In Henry’s Louisiana Grill, Inc. v. Allied Insurance Co. of America, 2022 U.S. App. LEXIS 15381 (11th Cir. June 3, 2022), Judge Grant, joined by Judges Luck and Anderson, concluded that because any route to coverage for the insured restaurant required “direct physical loss” of or “damage” to property, the restaurant’s policy did not cover any intangible harm caused by Covid-19 or a resulting declaration of public emergency. 

Following Georgia’s public state of emergency in March 2020, Henry’s Louisiana Grill suspended its dine-in service and filed an insurance claim with Allied Insurance. Henry’s sued after Allied Insurance denied coverage and lost on a motion to dismiss in the district court. The Eleventh Circuit affirmed the dismissal for failure to state a claim. Noting that the two provisions Henry’s sought to invoke each required some measure of “direct physical loss” of or “damage” to property, the court identified one question: “Does the presence of Covid-19, or a related closure after a declaration of public emergency, result in ‘direct physical loss of or damage to’ a property?”

Recognizing that under Georgia law, a “direct physical loss” must involve a tangible change to a property, the court answered “No.” See AFLAC Inc. v. Chubb & Son, Inc., 260 Ga. App. 306, 307 (2003). Dismissal was warranted because Henry’s failed to allege that Covid-19 caused any actual change to the property. The court’s conclusion aligns with every federal and state appellate court deciding the issue, and is consistent with the Eleventh Circuit’s earlier rulings against coverage on this issue. See SA Palm Beach, LLC v. Certain Underwriters at Lloyd’s London, 32 F.4th 1347 (11th Cir. May 5, 2022); Ascent Hosp. Mgmt. Co. v. Emp’rs Ins. Co. of Wausau, 2022 U.S. App. LEXIS 1161 (11th Cir. Jan. 14, 2022).

Posted by Ben Reed.

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