Jean Niven recently wrote a blog post about insurance coverage cases being won or lost based on expert witnesses and the preparation of their reports and testimony.

Mama Jo’s, Inc. d/b/a Berries, has now petitioned the U.S. Supreme Court to hear an appeal of the Eleventh Circuit’s ruling1 that the restaurant is not entitled to coverage under an “all risk” commercial insurance policy for business income losses and expenses caused by construction dust and debris that migrated into the restaurant.

Mama Jo’s asserts that the Eleventh Circuit’s decision deviates from controlling Florida law on the issue of what constitutes “direct physical loss” under an all-risk insurance policy. Mama Jo’s argues that determination of whether damage that can be “cleaned” constitutes “direct physical loss” to property, is a matter of great public importance.

In support of Supreme Court review, Mama Jo’s asserts that the implications of this overly narrow interpretation of coverage have a significant impact on the insurance industry.

While this case pertains to cleaning construction dust and debris as well as actual physical loss to property and business income, the restrictive interpretation of “direct physical loss” extends to claims involving the cleaning and remediation of water, mold, smoke, soot, and viruses.

The appellate court’s ruling requiring “tangible destruction” of property under all-risk policies nullifies entire areas of coverage that would normally afford coverage for clean-up expenses associated with debris removal from covered property.

Similarly, the Eleventh Circuit rational in requiring permanent damage or dispossession of property and suggesting that dust cannot “damage” property because the condition is only temporary departs from the current standard. Time element coverages are typically related to business and the loss is measured by a period of time.

Mama Jo’s further argues that certain issues presented overlap with the recent proliferation of COVID-19 insurance cases across the country. At the time the Eleventh Circuit issued the Opinion, this question of law already affected hundreds of thousands of policy holders. Significantly, as of the date of the petition, the Eleventh Circuit’s Opinion has been cited over 50 times in briefs directed towards COVID-19 claims. Insurance carriers are employing the rationale used by the Eleventh Circuit here and other jurisdictions to argue that viral contamination is not a direct physical loss because the virus can be cleaned or disinfected.

Though the case ruling is an unpublished opinion, insurers may continue to ignore basic insurance guidelines, and cite Mama Jo’s as a basis to continue denying coverage. Homeowners, insurers, and industry professionals will closely monitor this case, should the U.S. Supreme Court grant certiorari.
1 Mama Jo’s, Inc. v. Sparta Ins. Co., No. 18-12887 (11th Cir. Aug. 18, 2020).