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Wakonda Club v. Selective Ins. Co. of Am.

Wakonda Club v. Selective Ins. Co. of Am.

Supreme Court of Iowa

February 21, 2022, Submitted; April 22, 2022, Filed

No. 21-0374

Opinion

OXLEY, Justice.

Wakonda Club operates a private golf and country club in Des Moines. After Governor Kim Reynolds issued a proclamation restricting in-person services at bars and restaurants in response to the COVID-19 pandemic in 2020, Wakonda Club made a claim under its all-risk commercial property insurance policy for income it lost during the time it temporarily closed its facilities in compliance with the Governor's proclamation. Wakonda Club denied having any coronavirus contamination on its property or among its employees or members, asserting that its lost [*2]  profits were caused solely by the loss of its ability to fully use its premises. The claim was denied, Wakonda Club sued, and the district court granted summary judgment in favor of the insurer. Wakonda Club now appeals.

This case is one of hundreds around the country addressing business interruption insurance coverage for businesses impacted by similar government proclamations and orders stemming from the COVID-19 pandemic. This case presents our first opportunity to address whether the mere loss of use of business property constitutes "direct physical loss of or damage to property" to trigger coverage under the business interruption endorsement to an all-risk commercial property insurance policy like the one involved here. For the reasons provided below, we conclude the language "direct physical loss of" property requires a physical aspect to the loss of the property before coverage is triggered. We reject Wakonda Club's argument that loss of use, without something more, is enough. We therefore affirm the district court's order granting summary judgment in favor of the insurer.

On March 17, 2020, Governor Reynolds issued a proclamation closing all bars and restaurants from dine-in [*3]  or in-person service in response to the COVID-19 pandemic. Section 3(A) of the proclamation provides:

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2022 Iowa Sup. LEXIS 45 *; 2022 WL 1194012

WAKONDA CLUB, Appellant, vs. SELECTIVE INSURANCE COMPANY OF AMERICA, Appellee.

Prior History:  [*1] Appeal from the Iowa District Court for Polk County, Celene Gogerty, Judge. A business that temporarily suspended its operations in accordance with a COVID-19 disaster proclamation in March 2020 and was denied coverage under its business interruption insurance policy appeals a district court order granting summary judgment for its insurer.

Disposition: AFFIRMED.

CORE TERMS

physical loss, coverage, loss of use, premises, property damage, insurer, virus, proclamation, business interruption, provide coverage, losses, commercial property, insurance policy, cases, summary judgment, contamination, suspension, trigger, pandemic, district court, endorsement, provisions, ambiguous, beverages, Restaurants, destruction, restoration, all-risk, expenses, repaired

Civil Procedure, Summary Judgment, Entitlement as Matter of Law, Appropriateness, Judgments, Entitlement as Matter of Law, Appeals, Summary Judgment Review, Standards of Review, Genuine Disputes, Legal Entitlement, Insurance Law, Policy Interpretation, Ambiguous Terms, Construction Against Insurers, Claim, Contract & Practice Issues, Ordinary & Usual Meanings, Evidence, Burdens of Proof, Allocation, Procedure, Evidence & Trial, Burdens of Proof, Claims Made Policies, Coverage, Property Insurance, Coverage, Property Damage, Entire Contract, Business Insurance, Commercial General Liability Insurance, Property Claims, Replacement Costs, Reasonable Expectations, Reasonable Person, All Risks