Circle Block Partners, LLC v. Fireman's Fund Insurance Co., No. 21-2459 (7th Cir. 2022)
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Circle Block owns and operates a downtown Indianapolis hotel with more than 200 guest rooms, a business center, and spa and fitness facilities. In March 2020, state and county governments adopted public health measures in response to the spread of COVID-19, prohibiting public gatherings of more than 50 people. An Indiana stay-at-home order restricted travel and mandated the closure of all non-essential businesses. Hotels were considered essential businesses “to the extent they are used for lodging and delivery or carryout food services.” By March 19, only six guest rooms were occupied. A month later, the hotel suspended operations, while continuing to incur expenses. Circle Block filed an unsuccessful claim under its commercial property insurance policy, which included business income and extra expense coverage, civil authority coverage, dependent property coverage, communicable disease coverage, and business access coverage; each required “direct physical loss or damage” to property. The policy had a “mortality and disease” exclusion.
The Seventh Circuit affirmed the dismissal of the case and denied a motion to certify questions of state law to the Indiana Supreme Court. Circle Block did not allege any direct physical loss or damage; a mere loss of use or functionality was not sufficient. Nor were allegations that virus particles had attached to surfaces at the hotel enough to show direct physical loss or damage.
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