Jesse's Embers, LLC v. W. Agric. Ins. Co., 21-0623

CourtUnited States State Supreme Court of Iowa
Writing for the CourtOXLEY, Justice.
Citation973 N.W.2d 507
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.
Docket Number21-0623
Decision Date22 April 2022

973 N.W.2d 507

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.

Submitted February 22, 2022
Filed April 22, 2022


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

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

Oxley, J., delivered the opinion of the court, in which all justices joined.

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 , 973 N.W.2d 545 (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 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.

973 N.W.2d 509

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 of direct physical loss or damage for Business Income Coverage; or

(b) Immediately after the time of direct physical loss or damage for Extra Expense Coverage;

caused by or resulting from any Covered Cause of Loss at the described premises; and

(2) Ends on the earlier of:

(a) The date when the property at the described premises should be repaired, rebuilt or replaced with reasonable speed and similar quality; or

(b) The date when business is resumed at a new permanent location.

Similarly, the Extra Expense provision states:

g. Extra Expense

(1) We will pay necessary Extra Expense you incur during the "period of restoration" that you would not have incurred if there had been no direct physical loss or damage to property at the described premises. The loss or damage must be caused by or result from a Covered Cause of Loss.

Last, the Civil Authority provision explains:

i. Civil Authority

When a Covered Cause of Loss causes damage to property other than property at the described premises, we will pay for the actual loss of Business Income you sustain and necessary Extra Expense caused by action of civil authority that prohibits access to the described premises, provided that both of the following apply:

(1) Access to the area immediately surrounding the damaged property is prohibited by civil authority as a result of the damage, and the described premises are within that area but are not more than one mile from the damaged property; and

(2) The action of civil authority is taken in response to dangerous physical conditions resulting from the damage or continuation of the Covered Cause of Loss that caused the damage, or the action is taken to enable a civil authority to have unimpeded access to the damaged property.

As relevant to each of these provisions, the policy defines Covered Cause of Loss as "Direct physical loss unless the loss is excluded or limited under Section I - Property."

The policy also includes exclusions, providing, as relevant here:

We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is
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