Frontier Development, LLC v. Endurance American Specialty Insurance Company

USCA11 Case: 21-13449 Date Filed: 06/01/2022 Page: 1 of 9

[DO NOT PUBLISH]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

____________________

No. 21-13449
Non-Argument Calendar
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FRONTIER DEVELOPMENT, LLC,
Plaintiff-Appellant,
versus
ENDURANCE AMERICAN SPECIALTY
INSURANCE COMPANY,

Defendant-Appellee.
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Appeal from the United States District Court
for the Southern District of Florida
D.C. Docket No. 1:21-cv-20611-DPG
____________________
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2 Opinion of the Court 21-13449

Before JORDAN, NEWSOM, and LAGOA, Circuit Judges.
LAGOA, Circuit Judge:
Frontier Development, LLC (“Frontier”), appeals from the
district court’s dismissal of its complaint against Endurance Amer-
ican Specialty Insurance Company (“Endurance”). Frontier as-
serted claims for breach of contract and for declaratory judgment
against Endurance for failing to provide insurance coverage for
losses and expenses Frontier incurred because of COVID-19. Fron-
tier sought insurance coverage under the parties’ “all risk” insur-
ance agreement, which provided coverage for certain losses result-
ing from “direct physical loss or damage” to property.
The district court dismissed Frontier’s complaint for failure
to state a claim under Federal Rule of Civil Procedure 12(b)(6). In
so doing, the district court held that Frontier failed to plausibly al-
lege a direct physical loss or damage to property, as required for
coverage under the “all risk” insurance agreement. After careful
review, and in accordance with this Court’s recent decision in SA
Palm Beach, LLC v. Certain Underwriters at Lloyd’s London, 32
F.4th 1347 (11th Cir. 2022), we affirm the district court’s order.
I. BACKGROUND
Frontier owns and leases commercial properties throughout
the United States. “A significant portion of Frontier’s revenue and
profits are derived from” renting its commercial properties to com-
mercial tenants.
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21-13449 Opinion of the Court 3

Endurance issued an “all risk” insurance policy (the “Policy”)
to Frontier that “insure[d] against all risk of direct physical loss or
damage to covered property,” including Frontier’s commercial
properties. As a result of the COVID-19 pandemic, Frontier’s com-
mercial tenants were required to suspend their business operations,
and Frontier “suffered loss of actual rental value.” Frontier sought
coverage for its losses, and for related expenses, under five provi-
sions of the Policy. Each of the five provisions limited coverage to
“direct physical loss or damage.”
When Endurance failed to provide coverage to Frontier,
Frontier filed a complaint against Endurance in Florida state court.
In its complaint, Frontier generally alleged that Endurance was re-
quired to insure Frontier for the losses and expenses it incurred as
a result of COVID-19 because COVID-19 caused direct physical
loss and damage to Frontier’s properties. Specifically, Frontier al-
leged that COVID-19 prevented Frontier from “utitliz[ing]” its
properties and the “virus particles attach[ed] to, live[d] on and
[were] active on inert physical surfaces.” According to Frontier,
the “presence of COVID-19” thereby “damage[ed] the property,
den[ied] access to the property, prevent[ed] employees and cus-
tomers from physically occupying the property,” and “caus[ed] the
property to be physically uninhabitable.”
Endurance removed Frontier’s suit to federal court and
moved to dismiss Frontier’s complaint for failure to state a claim
under Rule 12(b)(6). In its motion to dismiss, Endurance argued
that Frontier failed to plausibly allege “direct physical loss or
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4 Opinion of the Court 21-13449

damage” to Frontier’s properties—as required to trigger coverage
under the Policy—because “direct physical loss or damage” means
a physical alteration of, or structural damage to, property. 1
The district court granted Endurance’s motion to dismiss.
The district court found that the Policy’s plain language limited
coverage to losses caused by “some physical problem with the cov-
ered property.” And the district court held that, by failing to allege
that COVID-19 caused a physical problem with its properties,
Frontier failed to plausibly allege that it was entitled to coverage
under the Policy. This appeal followed.
II. STANDARD OF REVIEW
We review the district court’s grant of a motion to dismiss
for failure to state a claim, as well as its forecast and application of
Florida law, de novo. SA Palm Beach, 32 F.4th at 1356.
III. ANALYSIS
“To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim to relief
that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678,
(2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)). As relevant to this appeal, to survive dismissal of its claims
for breach of the Policy and for declaratory judgment that the

1 Below, and on appeal, Endurance also argued that various exclusions within
the Policy exclude the losses and expenses Frontier sought coverage for. But
the district court did not address those arguments, and we decline to do so
here.
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21-13449 Opinion of the Court 5

Policy applies, Frontier was required to plausibly allege that it was
entitled to coverage under the Policy. The district court found that
Frontier failed to do so because Frontier failed to plausibly allege
that its losses were caused by “direct physical loss or damage” to its
properties.
On appeal, the parties agree that the Policy is governed by
Florida law and that the Policy only provides coverage for “direct
physical loss or damage to” property. But Frontier asserts that: (1)
the district court misinterpreted the phrase “direct physical loss or
damage”; and (2) it sufficiently alleged that its losses were caused
by “direct physical loss or damage.” We consider those arguments
in turn.
A. “Direct Physical Loss or Damage”
Under Florida law, “[i]f the language used in an insurance
policy is plain and unambiguous, a court must interpret the policy
in accordance with the plain meaning of the language used so as to
give effect to the policy as it was written.” State Farm Mut. Auto.
Ins. Co. v. Menendez, 70 So. 3d 566, 569–70 (Fla. 2011) (quoting
Travelers Indem. Co. v. PCR Inc., 889 So. 2d 779, 785 (Fla. 2004)).
But “[w]hen language in an insurance policy is ambiguous, a court
will resolve the ambiguity in favor of the insured by adopting the
reasonable interpretation of the policy’s language that provides
coverage.” Id. at 570 (quoting Travelers Indem., 889 So. 2d at 785–
86). “Policy language is considered to be ambiguous . . . if the lan-
guage ‘is susceptible to more than one reasonable interpretation,
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6 Opinion of the Court 21-13449

one providing coverage and the other limiting coverage.’” Id. (al-
teration in original) (quoting Travelers Indem., 889 So. 2d at 785).
The policy language at issue here is “direct physical loss or
damage” to property. That phrase is not defined in the Policy, and
the Florida Supreme Court has not interpreted this language in an
analogous context. But during the pendency of this appeal, this
Court released its decision in SA Palm Beach. In SA Palm Beach,
this Court, “[s]itting, ‘in effect, as a [Florida] state court,’” ad-
dressed the plain meaning of this language in the same context—
i.e., reviewing orders dismissing insureds’ complaints for failing to
plausibly allege direct physical losses or damages to property from
COVID-19. 2 32 F.4th at 1350 (alterations adopted) (quoting
Comm’r v. Estate of Bosch, 387 U.S. 456, 465 (1967)). There, we
held that a “direct physical loss or damage” requires “a tangible al-
teration of the insured propert[y].” Id. We also explained that,
“under Florida law, an item or structure that merely needs to be
cleaned has not suffered a ‘loss’ which is both ‘direct’ and ‘physi-
cal.’” Id. at 1361 (quoting Mama Jo’s Inc. v. Sparta Ins. Co., 823 F.
App’x 868, 879 (11th Cir. 2020)).

2 Frontier asserts that its claims should not have been dismissed at the pleading

stage because the Policy’s terms were, at least, ambiguous. But in SA Palm
Beach this Court found that allegations, similar to Frontier’s, were insufficient
to plausibly allege that insureds were entitled to coverage, at the pleading
stage, because of identical language within the relevant insurance policies. Id.
at 1357-1361.
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Frontier disagrees with this interpretation. Citing to two
Florida appellate court decisions—Homeowners Choice Property
& Casualty v. Maspons, 211 So. 3d 1067 (Fla. Dist. Ct. App.3d DCA
2017), and Azalea, Ltd. v. American States Ins. Co., 656 So. 2d 600
(Fla. 1st DCA 1995)—Frontier asserts that “when some physical ef-
fect causes the loss of the functionality of property, that loss of
functionality counts as a physical loss under Florida law.”
But SA Palm Beach analyzed both cases cited by Frontier
and found that neither case would support Frontier’s argument.
This Court explained that both cases involved tangible harms to
property: “Maspons involved . . . a physical break in the drain pipe,”
and Azalea involved “destruction of the bacteria colony which had
physically become part of the [insured’s] sewage treatment facil-
ity.” SA Palm Beach, 32 F.4th at 1360. This Court therefore con-
cluded that its interpretation—that “physical loss or damage” to
property means a “tangible alteration of the property”—was “le-
gally sound under Florida law” and supported by both Maspons
and Azalea. Id. at 1359.
We thus find that the Policy’s limitation of coverage for “di-
rect physical loss or damage” to property means that coverage is
limited to losses from “a tangible alteration of the insured proper-
ties.” 3 Id. at 1350.

3 Frontier requests, as an alternative to reversing
the district court’s order, that
we certify the question of what “direct physical loss or damage” means to the
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B. Frontier’s Allegations
Turning to Frontier’s complaint, Frontier alleged that it suf-
fered a “direct physical loss or damage” because “the COVID-19
virus was physically present” at its properties. Frontier alleged that
“[t]he presence of COVID-19 . . . made Frontier unable to utilize”
its properties and that “COVID-19 virus particles attach[ed] to,
live[d] on[,] and [were] active on inert physical surfaces,” which
“damage[ed] and “den[ied] access to the property,” “prevent[ed]
employees and customers from physically occupying the prop-
erty,” and “caus[ed] the property to be physically uninhabitable.”
We find that these allegations fail to plausibly allege that
Frontier’s losses and expenses were caused by direct physical loss
or damage to property—i.e., by “a tangible alteration” of Frontier’s
properties—as required for coverage under the Policy, for two rea-
sons. SA Palm Beach, 32 F.4th at 1350, 1358–1361. First, Frontier’s
conclusory assertion that COVID-19’s physical presence caused di-
rect physical loss or damage is “not entitled to be assumed true.”
Iqbal, 556 U.S. at 681. Second, Frontier did not allege that COVID-
19 caused “a tangible alteration of [its] properties,” and Frontier’s
specific factual allegations—that COVID-19 virus particles attached
to physical surfaces and prevented the properties from being
used—do not plausibly suggest any tangible alterations to the prop-
erties. SA Palm Beach, 32 F.4th at 1350. Indeed, in SA Palm Beach,

Florida Supreme Court. Because this Court has already interpreted the mean-
ing of this language in the same context, we decline to do so.
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this Court rejected a nearly identical assertion that “‘coronavirus
particles’ caused the damage, and . . . were ‘detectable on various
types of surfaces’” because the “need to clean or disinfect stores to
get rid of COVID-19 does not constitute direct physical loss or dam-
age under Florida law.” Id. at 1362.
Because Frontier failed to plausibly allege “a tangible altera-
tion of the insured properties,” the district court did not err in dis-
missing Frontier’s complaint for failing to plausibly allege that it
was entitled to coverage under the Policy.
IV. CONCLUSION
For the foregoing reasons, we affirm the district court’s or-
der dismissing Frontier’s complaint.
AFFIRMED.