Scherder v. Aspen Am. Ins. Co.

553 F.Supp.3d 1098

Edward A. SCHERDER, DMD and Edward A. Scherder, DMD, PA, Plaintiffs,

v.ASPEN AMERICAN INSURANCE COMPANY, Defendant.

Case No: 2:20-cv-697-JLB-NPM

United States District Court, M.D. Florida, Fort Myers Division.

Signed August 11, 2021

Alexander R. Hess, Pro Hac Vice, Edward F. Ruberry, Pro Hac Vice, Ruberry, Stalmack & Garvey, LLC, Chicago, IL, Joshua Michael Sword, Kerry C. McGuinn, Jr., Rywant, Alvarez, Jones, Russo & Guyton, P.A., Tampa, FL, for Plaintiffs.

William Stewart Berk, Alan Henry Swindoll, Berk, Merchant & Sims, PLC, Coral Gables, FL, Yolanda C. Garcia, Pro Hac Vice, Yvette Ostolaza, Pro Hac Vice, Sidley Auston, LLP, Dallas, TX, for Defendant.

ORDER

JOHN L. BADALAMENTI, United States District Judge

On March 20, 2020, Governor Ron DeSantis issued Executive Order 20-72 which, among other things, suspended all non-emergency dental procedures with the hope of curbing the spread of coronavirus and conserving medical supplies. Complying with this Executive Order, Plaintiff Dr. Edward Scherder, DMD, closed his dental practice, which allegedly resulted in him losing more than $700,000 in income. He subsequently submitted a claim for that lost income to his business's property insurer, Defendant Aspen American Insurance Company ("Aspen"). Aspen denied the claim because Dr. Scherder's lost income did not arise from any physical damage to property and thus was not covered under the Policy. Now, Dr. Scherder and his dental practice are suing Aspen for breach of contract and a declaration that the practice's incurred financial loss was covered under the Policy. (Doc. 1.)¹

Aspen moves to dismiss Dr. Scherder's operative pleading, asserting that the Policy (Doc. 1-1) does not cover intangible, purely economic losses like those in the Complaint. (Doc. 19.) Not only does Dr. Scherder oppose the motion to dismiss (Doc. 34), but he also moves to amend his Complaint. (Doc. 29). As the Court will explain, under the plain and unambiguous terms of the Policy, lost income—with no accompanying physical property damage—is not a covered loss. And because Dr. Scherder's claim is inextricably intertwined with his loss of business income due to the coronavirus pandemic, his motion to amend fails for the same reason that Aspen's motion to dismiss succeeds. Accordingly, this case is DISMISSED WITH PREJUDICE .

BACKGROUND²

It does not appear that Dr. Scherder has provided the Court with a copy of his actual insurance claim. Nevertheless, both the Complaint and the proposed amended complaint explain that he closed his dental practice after Governor DeSantis issued the Executive Order prohibiting non-emergency patient access. (Doc. 1 at ¶ 30; Doc. 29-1 at ¶ 48.)³ Dr. Scherder maintains that this closure, and the resulting loss of income, is a covered loss under the Policy's Civil Authority provision. (Doc. 1 at ¶ 41; Doc. 29-1 at ¶ 60.)

The Civil Authority provision limits coverage to physical damage to the property or any covered cause of loss as follows:

13. As respects practice income:

b. Civil Authority

We will pay for the actual loss of practice income ... you sustain caused by action of civil authority that prohibits access to the described premises due to the direct physical damage to property, other than at the [insured] premises, caused by or resulting from any covered cause of loss .

(Doc. 1-1 at 121 § I.B.13.b (emphasis in original).) Unless expressly excluded, the Policy defines a "covered cause of loss" as "all risk of direct physical loss" along with certain enumerated situations. (Id. at 132.) The policy defines "damage" as "partial or total loss of or damage to your covered property." (Id. at 133.) Read together, then, these definitions provide that the Policy does not cover claims for loss of practice income unless the lost income arises from some direct physical loss or damage to property. This invites the question: is the coronavirus capable of causing some direct physical loss or damage to property?

In Aspen's view, "[u]nder the plain meaning of the Policy, coverage is limited to situations in which property has sustained ‘direct physical damage,’ " and the coronavirus did nothing to compromise any property's physical structure. (Doc. 19 at 14.) Indeed, Dr. Scherder's pleadings and the accompanying denial letter show that this is exactly why Aspen denied coverage: no "property sustained direct physical damage. Instead, the inability to continue [Dr. Scherder's] practice, in whole or part, is due to" the Executive Order. (Doc. 1-2 at 5.) Dr. Scherder counters that the likely presence of coronavirus particles impairs the value, usefulness, and normal operations of property, thereby causing direct physical harm, damage, and loss. (See Doc. 29-1 at ¶¶ 33–37, 40.) Alternatively, he argues that the virus rendered his business property uninhabitable for its intended purpose, thus satisfying "any policy requirement of physical damage or loss." (Doc. 34 at 18.)

DISCUSSION

"In interpreting an insurance contract, [courts] are bound by the plain meaning of the contract's text." State Farm. Mut. Auto. Ins. Co. v. Menendez, 70 So. 3d 566, 569 (Fla. 2011). When faced with an undefined term, the Court " ‘may consult references’ such as dictionaries to discern the plain meaning of an insurance policy's language." Bioscience W., Inc. v. Gulfstream Prop. and Cas. Ins. Co., 185 So. 3d 638, 640 (Fla. 2d DCA 2016) (quoting Garcia v. Fed. Ins. Co., 969 So. 2d 288, 292 (Fla. 2007) ). "If the language used in an insurance policy is plain and unambiguous, a court must interpret the policy in accordance with the plain meaning of the language used so as to give effect to the policy as it was written." Menendez, 70 So. 3d at 569–70 (quoting Travelers Indem. Co. v. PCR Inc., 889 So. 2d 779, 785 (Fla. 2004) ). Last, "courts should read each policy as a whole, endeavoring to give every provision its full meaning and operative effect." U.S. Fire Ins. Co. v. J.S.U.B., Inc., 979 So. 2d 871, 877 (Fla. 2007) (quoting Auto–Owners Ins. Co. v. Anderson, 756 So. 2d 29, 34 (Fla. 2000) ).⁴

A reading of the unambiguous Civil Authority provision (together with other applicable Policy provisions) readily yields the conclusion that the mere loss of income or access to property, without more, is insufficient to trigger coverage under the Policy. Instead, that claim must arise from "direct physical damage to property." The Court's resolution of this dispute will therefore turn on the meaning of the undefined phrase "direct physical," which modifies both "damage to property" and risk of "loss." (Doc. 1-1 at 121, 132.)

I. Direct physical loss or damage to property alters the property's structure.

"The requirement that the loss be ‘physical,’ given the ordinary definition of that term, is widely held to exclude alleged losses that are intangible or incorporeal," thereby precluding "any claim against the property insurer when the insured merely suffers a detrimental economic impact unaccompanied by a distinct, demonstrable, physical alteration of the property." 10A Steven Plitt et al., Couch on Insurance § 148:46 (3d ed.), Westlaw (database updated June 2021). "A direct physical loss contemplates an actual change in [ ] property ... requiring that repairs be made to" return the property to its original, structural condition. Mama Jo's, Inc. v. Sparta Ins. Co., No. 17-cv-23362-KMM, 2018 WL 3412974, at *9 (S.D. Fla. June 11, 2018) (citation and internal quotation marks omitted), aff'd 823 F. App'x 868 (11th Cir. 2020).

"The plain meaning of the terms ‘direct physical loss of or damage to property’ unambiguously requires actual, tangible damage to the physical premises itself, not merely economic losses unaccompanied by a demonstrable physical alteration to the premises." Café Int'l Holding Co. v. Westchester Surplus Lines Ins. Co., No. 20-21641-GOODMAN, 2021 WL 1803805, at *8 (S.D. Fla. May 4, 2021). Explained differently, "[a] ‘loss’ is the diminution of value of something, and in this case, the ‘something’ is the insureds’ ... property. ‘Direct’ and ‘physical’ modify loss and impose the requirement that the damage be actual." Homeowners Choice Prop. & Cas. v. Maspons, 211 So. 3d 1067, 1069 (Fla. 3d DCA 2017) (quoting Loss, Black's Law Dictionary (10th ed. 2014)).⁵ In short, to allege a covered claim under the Policy, Dr. Scherder must allege that his lost income is due to an actual, demonstrable, physical alteration of property.

A reading of the Policy's other lost income provisions supports this conclusion. For example, along with the Civil Authority provision that Dr. Scherder specifically invokes (Doc. 34 at 7), the Policy also provides for a claim of lost income under the "Practice Income" and "Extra Expense" provisions. (Doc. 1-1 at 117 § I.A.3.a, 118 § I.A.4.) Both, like the Civil Authority provision, limit coverage to losses arising from some sort of direct physical damage to property. (Id. ) But where the Civil Authority provision limits the scope of any claim to "30 consecutive days," the "Practice Income" and "Extra expense" provisions contemplate coverage during a "period of restoration." (Id. ) The Policy defines a "period of restoration" as the period that "begins 24 hours immediately following direct physical damage ... caused by or resulting from any [risk of direct physical loss]" and ends "on the date when the property ... should be repaired, rebuilt or replaced with reasonable speed and similar quality." (Doc. 1-1 at 134 (emphasis added).)

Dr. Scherder briefly contends that Aspen's motion to dismiss on this point is irrelevant to the specific claims he brings under the Civil Authority provision. (Doc. 34 at 22.) But the Court cannot analyze the Civil Authority provision in a vacuum. Instead, the Court must "read [the] policy as a whole, endeavoring to give every provision its full meaning and operative effect." Anderson, 756 So. 2d at 34. The above provisions and definitions, which confine the scope of coverage for a claim of lost income,...