Town Kitchen LLC v. Certain Underwriters at Lloyd's, London

USCA11 Case: 21-10992 Date Filed: 05/27/2022 Page: 1 of 6

[DO NOT PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit

____________________

No. 21-10992
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TOWN KITCHEN LLC,
individually and on behalf of those similarly situated,
Plaintiff-Appellant,
versus
CERTAIN UNDERWRITERS AT LLOYD'S, LONDON,
Known As Syndicate ENH 5151, NEO 2468 XLC 2003, TAL
1183, TRV 5000, AGR 3268, ACS 1856, NVA 2007, HDU
382, PPP 1980, AMA 1200, ASC 1414 and VSM 5678,
INDIAN HARBOR INSURANCE COMPANY,
HDI GLOBAL SPECIALTY SE,

Defendants-Appellees.
USCA11 Case: 21-10992 Date Filed: 05/27/2022 Page: 2 of 6

2 Opinion of the Court 21-10992

____________________

Appeal from the United States District Court
for the Southern District of Florida
D.C. Docket No. 1:20-cv-22832-FAM
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Before WILLIAM PRYOR, Chief Judge, ROSENBAUM, and BRASHER,
Circuit Judges.
PER CURIAM:
Plaintiff-Appellant Town Kitchen LLC appeals the district
court’s dismissal of its amended complaint for failure to state a
plausible claim for insurance coverage. After careful review, we
affirm.
I.
Town Kitchen LLC owns and operates Town, a popular res-
taurant in Miami. Like many other businesses, Town Kitchen pur-
chased an all-risk commercial property insurance policy from De-
fendant-Appellee Certain Underwriters at Lloyd’s, London. 1
Following the suspension of business operations because of
the COVID-19 pandemic and government closure orders, Town
Kitchen sought coverage for losses and expenses under the

1 The other two Defendants-Appellees, Indian Harbor Insurance Company
and HDI Global Specialty SE, are insurance companies that share some liabil-
ity with Lloyd’s under Town Kitchen’s policy.
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21-10992 Opinion of the Court 3

Business Income, Extra Expense, and Civil Authority provisions of
its policy. As relevant here, those provisions require direct physical
loss of or damage to the property. Specifically, the Business In-
come coverage section states, “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 ‘suspen-
sion’ must be caused by direct physical loss of or damage to prop-
erty at premises . . . .”; Extra Expense is defined as “necessary ex-
penses you incur during the ‘period of restoration’ that you would
not have incurred if there had been no direct physical loss or dam-
age to property”; and the Civil Authority coverage applies only
when a Covered Cause of Loss (defined as “direct physical loss un-
less the loss is excluded or limited in this policy”) causes “damage
to property other than property at the described premises.” (em-
phases added).
After Defendants denied coverage, Town Kitchen filed a pu-
tative class action in Florida state court “on behalf of all entities that
do business in Florida: (1) having commercial property insurance
policies issued by Defendants including business interruption and
extra expense coverage that does not exclude coverage for pan-
demics; and (2) which have suffered losses due to measures put in
place by civil authorities to stop the spread of COVID-19.” Defend-
ants removed the action to federal court under the Class Action
Fairness Act and moved under Rule 12(b)(6), Fed. R. Civ. P., to dis-
miss Town Kitchen’s amended complaint for failure to state a
claim. The district court granted the motion.
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4 Opinion of the Court 21-10992

Town Kitchen appeals.
II.
We review de novo the district court’s order granting a mo-
tion to dismiss under Rule 12(b)(6), Fed. R. Civ. P., for failure to
state a claim, accepting the allegations in the complaint as true and
construing them in the light most favorable to the plaintiff. Hill v.
White, 321 F.3d 1334, 1335 (11th Cir. 2003).
And because this is a diversity action, we apply the substan-
tive law of Florida, the forum state, under Erie Railroad Co. v.
Tompkins, 304 U.S. 64 (1938). That means we must follow Florida
law as the Florida Supreme Court has construed it. Winn-Dixie
Stores, Inc. v. Dolgencorp, LLC, 746 F.3d 1008, 1021 (11th Cir.
2014). And where the Supreme Court has not yet opined on the
issue we consider, we must “adhere to decisions of the state’s in-
termediate appellate court absent some persuasive indication that
[the Florida Supreme Court] would decide the issue otherwise.”
Id. (citation and quotation marks omitted).
Here, when the district court decided this case, neither the
Florida Supreme Court nor any intermediate appellate court had
yet construed “an all-risk commercial insurance policy providing
coverage for ‘direct physical loss of or damage to’ property . . . in
the context of the COVID-19 pandemic.” SA Palm Beach, LLC v.
Certain Underwriters at Lloyd’s London, 20-14812, -- F.4th --, 2022
WL 1421414, at *7 (11th Cir. May 5, 2022). But while Town
Kitchen’s appeal was pending, we decided SA Palm Beach. We
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21-10992 Opinion of the Court 5

held in that case that, under Florida law, physical loss or damage
requires “some tangible alteration of the property,” so “[t]here is .
. . no coverage for loss of use based on intangible and incorporeal
harm to the property due to COVID-19 and the closure orders that
were issued by state and local authorities even though the property
was rendered temporarily unsuitable for its intended use.” Id. at *8
Since then, Florida’s Third District Court of Appeal con-
firmed that we correctly predicted how Florida courts would con-
strue the physical-damage provisions of these types of policies. It
also went further. In Commodore, Inc. v. Certain Underwriters at
Lloyd’s London, Florida’s Third District concluded that “‘direct
physical loss of or damage to property’ requires actual, tangible al-
teration to the insured property for coverage to be triggered under
the Policy.” 3D21-0671, -- So.3d --, 2022 WL 1481776, at *6 (Fla. 3d
DCA May 11, 2022). Economic losses do not satisfy that require-
ment. Id. Plus, the court favorably cited the district-court opinion
in this very case in holding that COVID-19 does not cause physical
damage to property: “And ‘[t]o the extent [COVID-19] is a physical
harm, such as COVID-19 particles present on surfaces in the res-
taurant, those can be easily cleaned.’” Id. (quoting Town Kitchen
LLC v. Certain Underwriters at Lloyd’s, London, 522 F. Supp. 3d
1216, 1225 (S.D. Fla. 2021)).
Not only are we bound by our prior-panel-precedent rule to
follow SA Palm here, see In re Lambrix, 776 F.3d 789, 794 (11th Cir.
2015), but also, as we have noted, Erie requires us to follow Com-
modore. Under both SA Palm and Commodore, coverage under
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6 Opinion of the Court 21-10992

Town Kitchen’s policy requires direct physical loss or damage to
the covered property, and the losses here resulted from intangible
harm caused by COVID-19. So Town Kitchen failed to plead that
its losses and expenses are covered under the policy. Nor could it
correct that deficiency upon repleading, given the holdings in SE
Palm and Commodore. So we affirm the dismissal of Town
Kitchen’s amended complaint.
AFFIRMED.