By Daphne Zhang

Law360 (September 14, 2020, 3:22 PM EDT) -- Aspen American Insurance Co. has told a Texas federal court that it should follow the "daily-growing" number of courts rejecting businesses' claims seeking COVID-19 closure coverage, since its policyholder, a Minnesota dental office, failed to show physical damage from its claimed revenue loss.

Aspen said Friday that "numerous courts" have held that insureds need to show tangible alteration to their property to claim physical damage, and "loss of use" during the pandemic is not a type of physical damage or loss covered by insurers.

"Like the daily-growing number of courts that have dismissed claims for lost income related to the pandemic where policyholders are contractually required to show, but have not shown, that 'direct physical damage' to property caused their losses, the court should dismiss plaintiff's claims," the carrier said in the motion.

In April, Christie Jo Berkseth-Rojas, who runs Rojas Family Dental in Minneapolis, hit Aspen with a proposed class action after the carrier denied coverage for her business losses resulting from government closure orders in March.

In Friday's motion, Aspen said Berkseth-Rojas failed to show direct physical damage to any covered property or that her claimed losses were caused by physical damage. The dentist's complaint did not demonstrate "a period of restoration," or "a need for repair, replacement, or rebuilding" to trigger coverage, the insurer added.

Aspen said the only "discernible loss" that Berkseth-Rojas alleged was losing function and access to her practice due to COVID-19 and government orders. And courts applying Minnesota law have routinely held that direct physical damage means "actual, tangible alteration of insured property as opposed to functional impairment or loss of use of insured property," the insurer said.

The insurer claimed that the court should follow the recent decision from the Western District of Texas that held that loss of use alone does not constitute direct physical loss, and dismissed a COVID-19 business interruption lawsuit.

"Plaintiff alleges nothing beyond speculation that COVID-19 was ever present in the insured premises," Aspen said, adding that the dental office was not able to show the novel coronavirus physically damaged or altered property. The clinic's losses "relate solely to the existence of the pandemic itself and the government shutdown orders that followed," the insurer said.

Additionally, Aspen said, the government orders were not "the consequence of damage to physical property," but were issued to curb the spread of COVID-19. Berkseth-Rojas alleged neither direct physical harm to her covered property nor a "causal link" between the harm and her lost revenue, so her claimed losses are not covered by the civil authority provision of the policy, it said.

The dental office's loss claims are further precluded by the policy's "loss of use" exclusion since the insured specifically alleged she experienced "loss of use" by being forced to suspend business operation, the carrier added.

Counsel from the parties did not immediately respond to requests for comment Monday. 

The dental office is represented by Adam Levitt of DiCello Levitt Gutzler LLC, W. Mark Lanier, Ralph D. McBride, and Alex J. Brown of The Lanier Law Firm PC.

Aspen is represented by Yvette Ostolaza, Yolanda C. Garcia and Mason Parham of Sidley Austin LLP.

The case is Christie Jo Berkseth-Rojas DDS v. Aspen American Insurance Co., case number 3:20-cv-00948, in the U.S. District Court for the Northern District of Texas.

--Editing by Bruce Goldman.

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