Jesse's Embers, LLC v. W. Agric. Ins. Co.

• Decision Date: 22 April 2022
• Docket Number: 21-0623
• Parties: JESSE'S EMBERS, LLC d/b/a JESSE'S EMBERS, Appellant, v. WESTERN AGRICULTURAL INSURANCE COMPANY d/b/a FARM BUREAU FINANCIAL SERVICES, Appellee.
• Court: United States State Supreme Court of Iowa

JESSE'S EMBERS, LLC d/b/a JESSE'S EMBERS, Appellant,
v.
WESTERN AGRICULTURAL INSURANCE COMPANY d/b/a FARM BUREAU FINANCIAL SERVICES, Appellee.

No. 21-0623

Supreme Court of Iowa

April 22, 2022

Submitted February 22, 2022

Appeal from the Iowa District Court for Polk County, Jeanie K. Vaudt, Judge.

A business that temporarily suspended operations of its bar and restaurant 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.

James W. Carney and Nicholas J. Mauro of Carney & Appleby, P.L.C., Des Moines, for appellant.

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Karl T. Olson of Parker & Geadelmann, P.L.L.C., West Des Moines, for appellee.

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OPINION

OXLEY, JUSTICE.

Jesse's Embers operates a bar and restaurant in Des Moines. It made a claim under its commercial property insurance policy for business interruption coverage for the time period it was forced to close its business after Governor Kim Reynolds ordered bars and restaurants to shut down in response to the COVID-19 pandemic. The claim was denied, Jesse's Embers brought this lawsuit, and now it appeals from the district court's entry of summary judgment in favor of its insurer.

We addressed similar policy provisions in a companion case, Wakonda Club v. Selective Insurance Co. of America, N.W.2d (Iowa 2022), also filed today. For the reasons provided below, we conclude the language "direct physical loss of or damage to Covered Property" requires a physical aspect to the property loss before coverage is triggered. Because Jesse's Embers relies solely on the loss of use of its property, without more, it failed to establish a loss within the coverage provided by the policy. For similar reasons, we hold Jesse's Embers' claim fails under the Civil Authority coverage provision, which requires actual damage to nearby property before it provides coverage. We affirm the district court's order granting summary judgment.

I.

In March 2020, Governor Reynolds issued a proclamation closing all bars and restaurants from dine-in or in-person service in response to the COVID-19 pandemic. In compliance with the proclamation, Jesse's Embers temporarily suspended its operations. It attempted to sell carry-out orders and reopened on

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May 12, 2020, for five days a week, as allowed by a modification of the proclamation.

Jesse's Embers later submitted a claim under its Business Owners Policy with Western Agricultural Insurance Company d/b/a Farm Bureau Financial Services (Farm Bureau) for losses it suffered as a result of suspending its operations. Jesse's Embers claimed the Business Income, Extra Expense, and Civil Authority provisions under the Additional Coverages portion of the policy provide coverage for its claim.

The policy's Additional Coverage related to "Business Income" provides:

f. Business Income (1) Business Income

(a) We will pay for the actual loss of Business Income you sustain due to the necessary suspension of your "operations" during the "period of restoration." The suspension must be caused by direct physical loss of or damage to property at the described premises. The loss or damage must be caused by or result from a Covered Cause of Loss

(b) We will only pay for loss of Business Income that you sustain during the "period of restoration" and that occurs within 12 consecutive months after the date of direct physical loss or damage

The policy defines "period of restoration" to

a. Mean[ ] the period of time that:

(1) Begins:

(a)72 hours after the time

...