By Joyce Hanson

Law360 (January 12, 2021, 7:25 PM EST) -- A Florida federal judge has tossed a Miami catering company's lawsuit seeking to force its insurer to pay for COVID-19-related losses, ruling that its commercial property policy's business income provision doesn't apply and that a virus exclusion doesn't cover physical loss or damage.

U.S. District Judge Beth Bloom on Monday found that Scottsdale Insurance Co. is entitled to dismissal of Mena Catering Inc.'s complaint under Florida law because the suit fails to allege coverage for insured property at two premises that suffered damage after civic closure orders forced cancellations of numerous events and resulted in food spoilage.

"There is no 'direct physical loss' where the alleged harm consists of the mere presence of the virus on the physical structure of the premises," Judge Bloom wrote, citing an Aug. 18 decision by the Eleventh Circuit in Mama Jo's Inc. v. Sparta Insurance Co. , which favored that insurer on a restaurant's claim for cleaning and painting costs and lost business income due to dust from a nearby construction site.

In addition, Judge Bloom pointed to a COVID-19 ruling on Sept. 28 in the Middle District of Florida in Infinity Exhibits Inc. v. Certain Underwriters at Lloyd's , which states, "Significantly, plaintiff is not the first insured to seek coverage due to COVID-19 government shutdown orders under a policy that limits coverage to losses caused by direct physical loss or damage to the property. Courts across the country have held that such coverage does not exist where, as here, policyholders fail to plead facts showing physical property damage."

Mena Catering initially filed suit against Scottsdale Insurance in state court on June 24, claiming that the policy for its two premises in Miami was meant to protect it from damages resulting from business interruptions, including the damage caused by Florida government officials' executive orders in 2020 to slow the spread of the coronavirus.

"Underwriter wrongfully denied [Mena's claim] on two principal bases: (a) that Mena's place of business allegedly was not physically damaged, and (b) the surplus line contained a virus and bacteria exclusion," according to the June 24 complaint. "Neither of these grounds for denial of coverage is valid."

The suit sought a declaratory judgment for coverage under the policy and an award of money damages against Scottsdale for the underwriter's alleged breach of contract in denying coverage and failure to pay for covered losses.

The insurer moved the case to Florida federal court on Sept. 2, saying in its removal notice that there is diversity of citizenship between Miami-based Mena and Ohio-based Scottsdale. Further, the insurer said, the amount in controversy came to at least $250,000, exceeding the $75,000 threshold for a federal court case.

In tossing the suit, Judge Bloom cited a string of other virus-related suits that have recently favored insurance companies.

A dental office was denied COVID-19-related coverage when the Northern District of Illinois ruled on Sept. 21 in Sandy Point Dental PC v. Cincinnati Insurance Co. that direct physical loss "unambiguously requires some form of actual, physical damage to the insured premises to trigger coverage," Judge Bloom wrote.

As for Mena's claims to coverage under the Scottsdale policy's civil authority provision, Judge Bloom cited the Southern District of Florida's Dec. 7 decision in El Novillo Restaurant v. Certain Underwriters at Lloyd's , saying Mena failed to allege facts triggering coverage.

"While plaintiff alleges that civil authority orders were entered in March 2020 prohibiting the use and occupancy of non-essential business, thereby affecting and preventing access to the insured property, the complaint alleges that the civil orders were issued in response to slow the global pandemic, not because of actual damage to any specific property near the premises," Judge Bloom wrote.

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

Mena Catering is represented by Alexis Gonzalez, Orion G. Callison III and Megha Mahajan of the Law Office of Alexis Gonzalez PA.

Scottsdale Insurance is represented by Thomas Keller of Butler Weihmuller Katz Craig LLP.

The case is Mena Catering Inc. v. Scottsdale Insurance Co., case number 1:20-cv-23661, in the U.S. District Court for the Southern District of Florida.

--Editing by Nicole Bleier.

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