Court filing

Defendant’s Suggestions in Support of Its Motion to Dismiss — Studio 417 v. Cincinnati Insurance

Filed June 22, 2020 in Studio 417 v. Cincinnati Insurance; one of 6 filings from this case.

Record facts

Court	U.S. District Court for the Western District of Missouri, Southern Division
Filed	2020-06-22

U.S. District Court for the Western District of Missouri, Southern Division · No. 6:20-cv-03127-SRB · Doc. 21 · 2020-06-22 · Docket on CourtListener

Full text

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF MISSOURI
SOUTHERN DIVISION

STUDIO 417, INC.,
)
GRAND STREET DINING, LLC,
)
GSD LENEXA, LLC,
)
TREZOMARE OPERATING COMPANY, )
LLC, and V’s RESTAURANT, INC.,
)
Each individually and on behalf of all
)
others similarly situated
)

)

Plaintiffs,

)
CASE NO. 6:20-CV-03127

)

vs.

)

)
THE CINCINNATI INSURANCE
)
COMPANY,

)

Defendant.

)

DEFENDANT THE CINCINNATI INSURANCE COMPANY’S
SUGGESTIONS IN SUPPORT OF ITS MOTION TO DISMISS

WALLACE SAUNDERS, P.C.
Michael L. Brown MO 55732
Kelvin J. Fisher MO 56573
10111 West 87th Street
Overland Park, KS 66212
(913) 888-1000 FAX - (913) 888-1065
mbrown@wallacesaunders.com
kfisher@wallacesaunders.com

LITCHFIELD CAVO LLP
Daniel Litchfield PHV pending
Ericka Hammett PHV
303 West Madison Street
Suite 300
Chicago, IL 60606
(312) 781-6669 FAX (312) 781-6630
litchfield@litchfieldcavo.com
hammett@litchfieldcavo.com
ATTORNEYS FOR DEFENDANT THE
CINCINNATI INSURANCE COMPANY
Case 6:20-cv-03127-SRB Document 21 Filed 06/22/20 Page 1 of 33

TABLE OF CONTENTS

TABLE OF AUTHORITIES ………………………………………………………
iii
OVERVIEW AND SUMMARY OF ARGUMENT .............……………………..
1
STATEMENT OF FACTS
………………………………………………………...

2
I.
Allegations of the Complaint ………………………………………
2
II.
The Plaintiffs’ Policies ……………………………………………..
7
A.
The Insurance Policies At Issue …………………………..
7
B.
The Policies’ Direct Physical Loss Requirement ………..
9
C.
Additional Requirements for Coverage
Under the Policies …………………………………………
10
ARGUMENT
I.
Motion to Dismiss Standard ………………………………………
11
II.
There Is No Direct Physical Loss and Accordingly There Is No
Coverage ……………………………………………………………
13
A.
There Are No Facts To Show Plaintiffs’ Property Was
Physically Altered, Thus There Is No Physical Loss …….
13
B.
American Case Law Is Overwhelmingly Consistent
With Source Food, Pentair and Great Plains Ventures
………………………………………………………………
17
C.
Coronavirus Does Not Affect the Structural Integrity
of Property; It Can Be Removed by Cleaning …………..
18
D.
The Lack of a Virus Exclusion Is Irrelevant Because
There Is No Direct Physical Loss …………………………
19
III.
There Is No Civil Authority Coverage ……………………………
20
A.
There is No Direct Physical Loss to Other Property …….
21
B.
The Requisite Prohibition of Access Is Lacking ………….
22
Case 6:20-cv-03127-SRB Document 21 Filed 06/22/20 Page 2 of 33

iii

IV.
There Is No Ingress and Egress Coverage ……………………………….
24
V.
There Is No Dependent Property Coverage ……………………………...
24
VI.
There Is No So-Called Sue and Labor Coverage ………………………..
25
CONCLUSION ……………………………………………………………………
26
CERTIFICATE OF SERVICE …………………………………………………..
27

Case 6:20-cv-03127-SRB Document 21 Filed 06/22/20 Page 3 of 33

TABLE OF AUTHORITIES

Cases
Bros., Inc. v. Liberty Mut. Fire Ins. Co., 268 A.2d 611, 614 (D.C. 1970).................................... 23
Cowin v. Shelter Mut. Ins. Co., 460 S.W.3d 76, 81 (Mo. Ct. App. 2015) .................................... 13
Crestview Country Club, Inc. v. St. Paul Guardian Ins. Co., 321 F. Supp. 2d 260,
264 (D. Mass. 2004).......................................................................................................... 17
Depositors Ins. Co. v. Dollansky, 905 N.W.2d 513, 515 (Minn. Ct. App. 2017), aff’d, 919
N.W.2d 684 (Minn. 2018)................................................................................................. 15
Elec. Power Sys. Int’l, Inc. v. Zurich Am. Ins. Co., 880 F.3d 1007, 1009 (8th Cir. 2018) ........... 10
Expl. Place, Inc. v. Midwest Drywall Co., 277 Kan. 898, 905–06, 89 P.3d 536, 541 (2004) ...... 10
Geer v. Eby, 309 Kan. 182, 192, 432 P.3d 1001, 1009 (2019) ..................................................... 13
Glick v. W. Power Sports, Inc., 944 F.3d 714, 717 (8th Cir. 2019) .............................................. 12
Goldstein v Trumbull Ins. Co., 2016 WL 1324197, 12 (N.Y. Sup. Ct. Apr. 05, 2016) ................ 23
Granite Re, Inc. v. Nat’l Credit Union Admin. Bd., 956 F.3d 1041, 1044 (8th Cir. 2020)........... 12
Great Plains Ventures, Inc. v. Liberty Mut. Fire Ins. Co., 161 F. Supp. 3d 970,
976 & 979 (D. Kan. 2016) .................................................................................... 15, 17, 21
Hawkeye-Sec. Ins. Co. v. Davis, 6 S.W.3d 419, 427 (Mo. Ct. App. 1999) .................................. 10
Johnson v. Studyvin, 828 F. Supp. 877, 881 (D. Kan. 1993) (Kansas law) .................................. 10
Johnson v. Spencer, 950 F.3d 680, 705 (10th Cir. 2020) ............................................................. 17
Kelaher, Connell & Conner, P.C. v. Auto-Owners Ins. Co., 2020 WL 886120, 8
(D.S.C. Feb. 24, 2020) ...................................................................................................... 21
Mama Jo’s, Inc. v. Sparta Ins. Co., 2018 WL 3412974, at *9 (S.D. Fla. June 11, 2018) ............ 18
Mastellone v. Lightning Rod Mut. Ins. Co., 2008-Ohio-311, ¶ 61, 175 Ohio App.
3d 23, 40, 884 N.E.2d 1130, 1143 ........................................................................ 17, 18, 19
Messina v. Shelter Ins. Co., 585 S.W.3d 839, 842–43 (Mo. Ct. App. 2019) ................................ 15
Miller v. Redwood Toxicology Lab., Inc., 688 F.3d 928, 931, n. 3 (8th Cir. 2012) ...................... 12
Newman Myers Kreines Gross Harris, P.C. v. Great N. Ins. Co., 17 F. Supp. 3d
323, 333 (S.D.N.Y. 2014) ................................................................................................. 20
Case 6:20-cv-03127-SRB Document 21 Filed 06/22/20 Page 4 of 33

Not Home Alone, Inc. v. Philadelphia Indem. Ins. Co., 2011 WL 13214381, 6
(E.D. Tex. Mar. 30, 2011) ................................................................................................. 21
Pentair, Inc. v. Am. Guarantee & Liab. Ins. Co., 400 F.3d 613 (8th Cir. 2005) .............. 14, 15, 17
Philadelphia Parking Auth. v. Fed. Ins. Co., 385 F. Supp. 2d 280, 289 (S.D.N.Y. 2005) ........... 17
Rias v. Safeco Ins. Co. of Am., 594 F. Supp. 2d 1090, 1095 (E.D. Mo. 2009) ............................... 7
Roundabout Theatre Co. v. Cont’l Cas. Co., 302 A.D.2d 1, 9, 751 N.Y.S.2d 4, 10 (2002) ........ 20
S. Texas Med. Clinics, P.A. v. CNA Fin. Corp., 2008 WL 450012, 10 (S.D. Tex.
Feb. 15, 2008) ................................................................................................................... 21
Schultz Furriers, Inc. v Travelers Cas. Ins. Co. of America, 2015 WL 13547667, 6
(N.J. Super. L. July 24, 2015) ........................................................................................... 23
Ski Shawnee, Inc. v. Commonwealth Ins. Co., 2010 WL 2696782, 4 (M.D. Pa.
July 6, 2010)...................................................................................................................... 22
Social Life Magazine, Inc. v. Sentinel Ins. Co., Ltd., 1:20-cv-03311-VEC (S.D.N.Y.) ............... 17
Source Food Tech., Inc. v. U.S. Fid. & Guar. Co., 465 F.3d 834 (8th Cir. 2006)................. passim
Southern Hospitality, Inc., Inc. v. Zurich Am. Ins. Co., 393 F.3d 1137 (10th Cir. 2004) ............. 22
Stodghill v. Wellston Sch. Dist., 512 F.3d 472, 476 (8th Cir. 2008) ............................................. 11
Stutzka v. McCarville, 420 F.3d 757, 760, n. 2 (8th Cir. 2005) ................................................ 3, 19
Syufy Enterprises v. Home Ins. Co. of Indiana, 1995 WL 129229, 2
(N.D. Cal. Mar. 21, 1995) ................................................................................................. 23
TMC Stores, Inc. v. Federated Mut. Ins. Co., 2005 WL 1331700, 4 (Minn. Ct. App.
June 7, 2005) ..................................................................................................................... 23
United Air Lines, Inc. v. Ins. Co. of State of PA, 439 F.3d 128, 131 (2d Cir. 2006) .................... 21
Universal Image Prods., Inc. v. Chubb Corp., 703 F.Supp.2d 705, 710 (E.D. Mich. 2010) ........ 18
Varga v. U.S. Bank Nat. Ass’n, 764 F.3d 833, 838 (8th Cir. 2014) .............................................. 12
Ward Gen. Ins. Servs., Inc. v. Employers Fire Ins. Co., 114 Cal. App. 4th 548, 555,
7 Cal. Rptr. 3d 844, 850 (2003) ........................................................................................ 20
Westcott v. City of Omaha, 901 F.2d 1486, 1488 (8th Cir. 1990) ................................................ 12
Zinser v. Auto-Owners Ins. Co., 2017-Ohio-5668, ¶ 33 (Ohio App.) ........................................... 20
Case 6:20-cv-03127-SRB Document 21 Filed 06/22/20 Page 5 of 33

Other Authorities
10A Couch on Ins. § 148:46 ............................................................................................. 13, 17, 18
11A Couch on Ins. § 167:15 ......................................................................................................... 20
5 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure
§ 1327 & n. 22 (4th ed.) (Wright & Miller) ...................................................................... 12
CDC Reopening Guidance for Cleaning and Disinfecting (4/28/2020) ......................................... 19
CDC, Cleaning and Disinfection for Households .......................................................................... 19
Rules
Fed.R.Civ.P. 12(b)(6)...................................................................................................................... 1
L.R. 7.0 ........................................................................................................................................... 1

Case 6:20-cv-03127-SRB Document 21 Filed 06/22/20 Page 6 of 33

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF MISSOURI
SOUTHERN DIVISION

)

Plaintiffs,

)
CASE NO. 6:20-CV-03127

)

vs.

)

)
THE CINCINNATI INSURANCE
)
COMPANY,

)

Defendant.

)

DEFENDANT THE CINCINNATI INSURANCE COMPANY’S
SUGGESTIONS IN SUPPORT OF ITS MOTION TO DISMISS
Pursuant to Fed.R.Civ.P. 12(b)(6) and L.R. 7.0, The Cincinnati Insurance Company
(“Cincinnati”) moves to dismiss this case because the Plaintiffs fail to state a claim on which relief
may be granted. Based on the allegations of the First Amended Class Action Complaint (“the
Complaint”) and the language of Cincinnati’s insurance policies (“the Policies”), Plaintiffs cannot
prove their claims.
OVERVIEW AND SUMMARY OF ARGUMENT
The Policies at issue supply property insurance coverage. They are designed to indemnify
loss or damage to property, such as in the case of a fire or storm. Coronavirus (or “COVID-19”)
does not damage property; it hurts people. Plaintiffs demand the Policies’ Business Income, Extra
Expense, Civil Authority, Extended Business Income, Ingress and Egress, Dependent Property,
and so-called Sue and Labor coverages. But, because they are part of a property insurance policy,
Case 6:20-cv-03127-SRB Document 21 Filed 06/22/20 Page 7 of 33

these coverages protect Plaintiffs only for income losses tied to physical damage to property, not
for economic loss caused by governmental or other efforts to protect the public from disease. The
Plaintiffs’ allegations establish that they have not sustained any losses attributable to direct
physical loss to property. Rather, Plaintiffs allege that the Coronavirus pandemic spreads COVID-
19 among humans. Moreover, the same direct physical loss requirement applies to all the
coverages for which Plaintiffs sue. Thus, it applies to the Civil Authority coverage, Ingress and
Egress coverage, and Dependent Property coverage.
At bottom, Plaintiffs bear the initial burden of showing actual direct physical loss to
property. This is always necessary to make a prima facia case for property insurance coverage.
Because Plaintiffs fail to allege direct physical loss, they ask for a vast extension of Missouri and
Kansas insurance law1 that would create coverage from whole cloth. This should not be permitted.
For all of these reasons, and for the other reasons established below, Plaintiffs’ Complaint
should be dismissed.
STATEMENT OF FACTS
I.
Allegations of the Complaint
The Complaint includes the following allegations:
 For many years, Plaintiff Studio 417, Inc. has operated hair salons in the
Springfield metropolitan area. (Complaint (“Compl.”) at ¶ 2).

 For many years, Plaintiffs Grand Street Dining, LLC, GSD Lenexa, LLC,
Trezomare Operating Company, LLC, and V’s Restaurant, Inc. have owned and
operated full-service fine dining restaurants in the Kansas City metropolitan
area. Plaintiffs Grand Street Dining, LLC, GSD Lenexa, LLC, Trezomare
Operating Company, LLC, and V’s Restaurant, Inc.’s restaurants also provide
catering services and wedding and event space. (Compl. at ¶ 3)

1 As will be discussed, Kansas law may apply to one of the policies at issue here. For that reason, Cincinnati shows
that there is no coverage under either Missouri or Kansas law.
Case 6:20-cv-03127-SRB Document 21 Filed 06/22/20 Page 8 of 33

 Plaintiffs’ operations have been and continue to be suspended and threatened
by the novel coronavirus, SARS-CoV-2, which causes the infectious disease
COVID-19. (Compl. at ¶ 4).

 Plaintiffs were forced to suspend or reduce business at their covered premises due
to COVID-19 and the ensuing orders issued by civil authorities in Missouri and
Kansas, mandating the suspension of business for on-site services, as well as in
order to take necessary steps to prevent further damage and minimize the
suspension of business and continue operations. (Compl. at ¶ 14).2

 . . . . Cincinnati issued Policy No. ECP0504158 to Plaintiff Studio 417, for a policy
period of September 18 [sic], 2018 to September 18 [sic], 2021,3 including a
Building and Personal Property Coverage Form and Business Income (And Extra
Expense) Coverage Form [“the Studio 417 Policy”]. . . . The Covered Propert[ies]
. . . are hair salons located [in] . . . Springfield, Missouri. (Compl. at ¶ 20).4

 . . . . Cincinnati issued Policy No. ECP0515325 to Grand Street, for a policy
period of December 5, 2018 to December 5, 2021, including a Building and
Personal Property Coverage Form and Business Income (And Extra Expense)
Coverage Form [“the Grand Street Policy”] . . . . The Covered Propert[ies] . . .
[are] the Grand Street Cafe restaurants located [in] . . . Kansas City, Missouri .
. . and Lenexa, Kansas . . . . (Compl. at ¶ 21).

 . . . . Cincinnati issued Policy No. ECP0443843 to Trezomare for a policy period
of July 1, 2017 to July 1, 2020, including a Building and Personal Property
Coverage Form and Business Income (And Extra Expense) Coverage Form
[“the Trezomare Policy”] . . . . The Covered Property . . . is the Trezo Mare
restaurant located [in] . . . Kansas City, Missouri . . . . (Compl. at ¶ 22)

 . . . . Cincinnati issued Policy No. ECP0477874 to V’s Restaurant for a policy
period of March 1, 2018 to March 1, 2021, including a Building and Personal
Property Coverage Form and Business Income (And Extra Expense) Coverage
Form [“the V’s Restaurant Policy”] . . . . The Covered Property . . . is the V’s
Italiano Ristorante located [in] . . . Independence, Missouri 64055. (Compl. at
¶ 23).5

2 Plaintiffs did not attach copies of the Closure Orders to the Complaint. However, the Court may take judicial notice
of those orders and other matters of public record. Stutzka v. McCarville, 420 F.3d 757, 760, n. 2 (8th Cir. 2005).
3 A copy of the Studio 417 Policy was attached as Exhibit 1 to the original complaint. It shows the correct policy
period is September 8, 2018 to September 8, 2021. (See Dkt. 1-1, Studio 417 Policy, p. 2).
4 Grand Street and Trezomare originally filed their own class action lawsuit against Cincinnati in this Court, Case No.
20-cv-330 (filed Apr. 23, 2020). The matter was assigned to the Hon. Brian C. Wimes. On May 27, 2020, Grand Street
and Trezomare voluntarily dismissed that action. Then, Studio 417 amended its complaint to add Grand Street and
Trezomare, among others. This effectively transferred the Grand Street action to this action. Copies of the Grand
Street Policy and the Trezomare Policy were attached to the now-dismissed Complaint in Case No. 20-cv-330 as
Exhibits A and B (Dkt. No. 1-2 & 1-3), respectively and are attached as Exhibits A and B to this Brief accordingly.
5 Plaintiffs failed to file a copy of the V’s Restaurant Policy. Accordingly, a certified copy of that policy is included
as Exhibit C to this brief.
Case 6:20-cv-03127-SRB Document 21 Filed 06/22/20 Page 9 of 33

 Under the heading “Covered Causes of Loss,” Defendant agreed to pay for
“direct ‘loss’ unless the ‘loss’ is excluded or limited” in the policies. (Compl.
at ¶ 27).


Defendant did not exclude or limit coverage for losses from viruses in
Plaintiffs’ policies or those of the other Class members. The policies also did
not exclude pandemic coverage, communicable disease coverage or anything
similar. (Compl. at ¶ 28).

 “Loss” is defined to mean accidental physical loss or accidental physical
damage. (Compl. at ¶ 31).

 “Suspension” is defined to mean the slowdown or cessation of business
activities and that part or all of the covered premises is rendered untenable.
(Compl. at ¶ 32) (emphasis added).6

 The CDC has reported that a person can be become infected with COVID-19 by
touching a surface or object (like a table, floor, wall, furniture, desk, countertop,
touch screen or chair) that has the virus on it, and then touching their own mouth,
nose or eyes. COVID-19 can and does live on and/or remains capable of being
transmitted and active on inert physical surfaces. (Compl. at ¶ 49).

 In addition, The New England Journal of Medicine reported finding that
experimentally-produced aerosols containing the virus remained infectious in
tissue-culture assays, with only a slight reduction in infectivity during a 3-hour
period of observations. An April 2020 study published in the journal Emerging
Infectious Diseases found a wide distribution of COVID-19 on surfaces and in
the air about 13 feet from patients in two hospital wards. This means there has
been a finding of COVID-19 in the air. (Compl. at ¶ 51).

 The presence of any COVID-19 particles renders items of physical property
unsafe and the premises unsafe. (Compl. at ¶ 55).

 The presence of any COVID-19 particles on physical property impairs its value,
usefulness and/or normal function. (Compl. at ¶ 56).

 The presence of any COVID-19 particles causes direct physical harm, direct
physical damage and direct physical loss to property. (Compl. at ¶ 57).

6 No facts alleged in the Complaint show the premises was untenantable. But, even if it were, the Complaint fails as
a matter of law because it does not allege physical loss to property caused by the Coronavirus, or otherwise.
Case 6:20-cv-03127-SRB Document 21 Filed 06/22/20 Page 10 of 33

 The presence of people infected with or carrying COVID-19 particles renders
physical property in their vicinity unsafe and unusable, resulting in direct
physical loss to that property. (Compl. at ¶ 58).

 The presence of people infected with or carrying COVID-19 particles at
premises renders the premises, including property located at that premises
unsafe, resulting in direct physical loss to the premises and property. (Compl.
at ¶ 59).

 Plaintiffs’ premises likely have been infected with COVID-19 and they have
suffered direct physical loss to their property. The incubation period for COVID-
19 is at least 14 days. Current evidence shows that the first death from COVID-
19 occurred as early as February 6, 2020—weeks earlier than previously
reported, suggesting that the virus has been circulated in the United States far
longer than previously assumed. It is likely customers, employees and/or other
visitors to the insured properties over the last several months were infected with
COVID-19 and thereby infected the insured properties with COVID-19.
(Compl. at ¶ 60).

 To reduce the spread of the disease, the CDC has recommended that businesses
clean and disinfect all surfaces, prioritizing the most frequently touched
surfaces. (Compl. at ¶ 61).

 The presence of COVID-19 has caused civil authorities throughout the country
to issue orders requiring the suspension of business at a wide range of
establishments, including civil authorities with jurisdiction over Plaintiffs’
businesses (the “Closure Orders”). (Compl. at ¶ 64).7

 Loss of use of property that has not been physically altered constitutes
“physical loss or damage” for purposes of first-party property insurance.
(Compl. at ¶ 100) (emphasis added).

 The presence of COVID-19 caused direct physical loss of or damage to the
covered property or “premises” under the Plaintiffs’ policies, and the policies
of the other Class members, by denying use of and damaging the covered
property, and by causing a necessary suspension of operations during a period
of restoration. (Compl. at ¶ 102).

 The Closure Orders prohibited access to and use of Plaintiffs’ and the other
Class members’ Covered Property, and the area immediately surrounding
damaged property, in response to dangerous physical conditions resulting from

7 The Complaint purports to summarize the Missouri and Kansas Closure Orders. For brevity, Cincinnati does not
reproduce those allegations. However, as pertinent to this Motion, the Complaint alleges that under the Closure Orders,
restaurants were permitted to provide drive-thru, curbside pickup and delivery services. (See Compl. at ¶¶ 73, 76, 78-
80 & 93).
Case 6:20-cv-03127-SRB Document 21 Filed 06/22/20 Page 11 of 33

the damage or continuation of the Covered Cause of Loss that caused the
damage. (Compl. at ¶ 103).

 The presence of COVID-19 and the Closure Orders caused a direct loss to
Plaintiffs’ dependent property, which resulted in a loss of Business Income
sustained. (Compl. at ¶ 104).

 The presence of COVID-19 and the Closure Orders caused a direct loss to
locations contiguous to Plaintiffs’ premises, which prevented existing ingress
and/or egress at Plaintiffs’ premises and caused a loss of Business Income
sustained and necessary Extra Expense incurred. (Compl. at ¶ 105).

 . . . . [Missouri’s Closure Orders] have required and continue to require
Plaintiffs to cease and/or significantly reduce operations at, and that have
prohibited and continue to prohibit access to, the premises described in their
policies. (Compl. at ¶ 106).

 . . . . [Kansas’s Closure Orders] have required and continue to require Plaintiff
Grand Street to cease and/or significantly reduce operations at, and that have
prohibited and continue to prohibit access to, the premises described in their
policy. (Compl. at ¶ 107).

 State and local governmental authorities and public health officials around the
United States acknowledge that COVID-19 and the Pandemic cause direct
physical loss and damage to property. . . . (Compl. at ¶ 108).

The Complaint contains fourteen counts, all of which are based on contract interpretation: 1)
Declaratory Judgment – Business Income Coverage; 2) Breach of Contract – Business Income
Coverage; 3) Declaratory Judgment – Extra Expense Coverage; 4) Breach of Contract – Extra Expense
Coverage; 5) Declaratory Judgment – Dependent Property Coverage; 6) Breach of Contract -
Dependent Property Coverage; 7) Declaratory Judgment – Civil Authority Coverage; 8) Breach of
Contract – Civil Authority Coverage; 9) Declaratory Judgment – Extended Business Income
Coverage; 10) Breach of Contract – Extended Business Income Coverage; 11) Declaratory Judgment
– Ingress and Egress Coverage; 12) Breach of Contract – Ingress and Egress Coverage; 13)
Declaratory Judgment – Sue and Labor Coverage; 14) Breach of Contract – Sue and Labor Coverage.
The Complaint seeks class certification for fourteen nationwide classes (one for each cause of
Case 6:20-cv-03127-SRB Document 21 Filed 06/22/20 Page 12 of 33

action asserted in the Complaint) and a Missouri Subclass consisting of “all policyholders who
purchased one of Defendant’s policies in Missouri and were denied coverage due to COVID-19.” (See
Compl. at ¶¶ 118-125).8
II.
The Plaintiffs’ Policies

A.
The Insurance Policies At Issue
Cincinnati issued Policy No. ECP 050 41 58 to STUDIO 41, INC DBA STUDIO 417 SALON;
417 BLOW DRY BAR for the policy period September 8, 2018 to September 8, 2021. (Studio 417
Policy, p. 2).9 Cincinnati issued the Studio 417 Policy to Studio 417 in Missouri through a Missouri
insurance agency. (Studio 417 Policy, p. 2). The Studio 417 Policy insures Studio 417’s three salon
premises, each of which is located in Missouri. (Studio 417 Policy, p. 5).
Cincinnati issued Policy No. ECP 051 53 25 to GRAND STREET DINING LLC, DBA
GRAND STREET CAFE; GSD LENEXA LLC (collectively, “Grand Street”) for the policy period
December 5, 2018 to December 5, 2021. (Grand Street Policy, p. 14). Cincinnati issued the Grand
Street Policy to Grand Street in Kansas through a Kansas insurance agency. (Grand Street Policy, p.
14). The Grand Street Policy insures Grand Street Dining’s cafe in Missouri and GSD Lenexa’s cafe
in Kansas.10 (Grand Street Policy, p. 22)
Cincinnati also issued Policy No. ECP 044 38 43 to TREZOMARE OPERATING
COMPANY, LLC, for the policy period July 1, 2017 to July 1, 2020. (Trezomare Policy, p. 10).
Cincinnati issued the Trezomare Policy to Trezomare in Missouri through a Missouri insurance

8 Cincinnati does not address Plaintiff’s “Class Action Allegations” because the Complaint does not state a claim on
which relief may be granted in the first instance. Cincinnati reserves the right to dispute the class allegations and to
dispute class certification in the event this Court denies Cincinnati’s Motion to Dismiss.
9 Citations to page numbers of the Studio 417, Grand Street, and Trezomare Policies refer to the ECF stamped page
numbers in the footer of those documents.
10 Under applicable choice of law rules, Kansas law may govern the interpretation of the Grand Street Policy, while
Missouri law applies to the remaining Policies at issue. See, e.g., Rias v. Safeco Ins. Co. of Am., 594 F. Supp. 2d 1090,
1095 (E.D. Mo. 2009). However, as demonstrated in this brief, the laws of the State of Kansas and the State of Missouri
are in accord on all pertinent issues.
Case 6:20-cv-03127-SRB Document 21 Filed 06/22/20 Page 13 of 33

agency. (Trezomare Policy, p. 10). The Trezomare Policy insures Trezomare’s restaurant premises
in Missouri. (Trezomare Policy, p. 14).
Finally, Cincinnati issued Policy No. ECP 047 78 74 to V’s RESTAURANT INC. DBA
V’s RESTAURANT AND CREATIVE, for the policy period March 1, 2018 to March 1, 2021
(V’s Restaurant Policy, p. 2).11 Cincinnati issued the V’s Restaurant Policy to V’s Restaurant in
Missouri through a Missouri insurance agency. (V’s Restaurant Policy, p. 2). The V’s Restaurant
Policy insures V’s Restaurant’s restaurant premises in Missouri. (V’s Restaurant Policy, p. 6).
For present purposes, the pertinent forms in each of the Policies are form FM 101 05 16
(Building and Personal Property Coverage Form), form FA 213 05 16 (Business Income (and Extra
Expense) Coverage Form), and form FCP 201 05 16 (Commercial Property Amendatory
Endorsement). (See, e.g., Studio 417 Policy, pp. 20-59, 62-67 & 92-100).12 The Building and
Personal Property Coverage form, FM 101 05 16, is the main property coverage form. The
Business Income (and Extra Expense) Coverage form, FA 213 05 16, focuses on business income
and extra expenses. Using the same language, both forms supply Business Income and Extra
Expense Coverage, but only if the necessary elements for coverage are satisfied. Both forms also
contain the Extra Expense, Civil Authority, Extended Business Income coverages, and the so-
called Sue and Labor coverage, all of which are put at issue by the Complaint. Only the Business
Income Coverage form includes Ingress and Egress coverage.
Finally, the Amendatory Endorsement supplies Dependent Property coverage up to
$10,000 per occurrence for each “dependent property.” But, again, like the other coverages, the
Dependent Property coverage requires direct physical loss and applies only if all of the elements

11 Because the pertinent insuring provisions of each of the insurance policies at issue is identical, Cincinnati refers to
those policies collectively as “the Policies.”
12 (See also Grand Street Policy, pp. 54-93, 96-101 & 142-150; Trezomare Policy, pp. 36-75, 78-83 & 105-113; V’s
Restaurant Policy, pp. 25-64, 67-72 & 99-107).
Case 6:20-cv-03127-SRB Document 21 Filed 06/22/20 Page 14 of 33

for coverage stated in that form are met. (See, e.g., Studio 417 Policy, pp. 64-65).13
B.
The Policies’ Direct Physical Loss Requirement
The requirement of “direct physical loss” is a core element in property insurance policies
like Plaintiffs’. The requirement appears in multiple places. For example, direct physical loss to
the Plaintiffs’ property is required for Business Income coverage:
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 “loss” to property at “premises” which are described in the Declarations
and for which a “Business Income” Limit of Insurance is shown on the Declarations. The
“loss” must be caused by or result from a Covered Cause of Loss.

(See, e.g., Studio 417 Policy, pp. 37-38 & 92). Covered Cause of Loss is defined as “direct ‘loss’
unless the ‘loss’ is excluded or limited in this Coverage Part.” (See, e.g., Studio 417 Policy, pp. 24
& 93). “Loss” is defined, in relevant part, as physical loss or damage. (See, e.g., Studio 417 Policy,
pp. 57 & 100).14 Accordingly, there is no Covered Cause of Loss, and therefore no Business
Income coverage, unless the insured first establishes, among other things, that there is direct
physical loss to covered property.
Therefore, the requirement of direct physical loss applies to any coverage requiring a
Covered Cause of Loss. A Covered Cause of Loss and thus direct physical loss, is an express
requirement for coverage under each of the individual Extra Expense, Civil Authority, Extended
Business Income, Ingress and Egress, Dependent Property, and so-called Sue and Labor coverages
sought by Plaintiffs. (See, e.g., Studio 417 Policy, pp. 38 & 92-93 (Extra Expense); pp. 38 & 93
(Civil Authority), pp. 39 & 94 (Extended Business Income); pp. 64-65 (Dependent Property), p.

13 (See also Grand Street Policy, pp. 98-99; Trezomare Policy, pp. 80-81; V’s Restaurant Policy, pp. 69-70).
14 (See also Grand Street Policy, pp. 58, 71-72, 91, 142-143, 150; Trezomare Policy, pp. 40, 53-54, 73, 105-106, 113;
V’s Restaurant Policy, pp. 29, 42-43, 62, 99-100 & 107)
Case 6:20-cv-03127-SRB Document 21 Filed 06/22/20 Page 15 of 33

95 (Ingress and Egress), pp. 49-50 & 96 (Sue and Labor)).15
Furthermore, while the definition of Covered Cause of Loss refers to exclusions, exclusions
do not come into play unless there is first direct physical loss. Elec. Power Sys. Int’l, Inc. v. Zurich
Am. Ins. Co., 880 F.3d 1007, 1009 (8th Cir. 2018) (Under Missouri law, “[i]t is the insured’s
burden to establish coverage under the policy and the insurer’s burden to show that an exclusion
to coverage applies.”); and see Expl. Place, Inc. v. Midwest Drywall Co., 277 Kan. 898, 905–06,
89 P.3d 536, 541 (2004) (“[T]he burden is on the insured to prove that a loss falls within the scope
of an insurance policy. However, the burden of proving that an exclusionary provision applies to
preclude coverage falls upon the insurer.”) (Kansas law) (Internal citations omitted); and see
Hawkeye-Sec. Ins. Co. v. Davis, 6 S.W.3d 419, 427 (Mo. Ct. App. 1999); Johnson v. Studyvin, 828
F. Supp. 877, 881 (D. Kan. 1993) (Kansas law).
C.
Additional Requirements for Coverage Under the Policies
In addition to the direct physical loss requirement, Civil Authority coverage requires an
actual loss of Business Income that an insured sustains if the loss is caused by an action of a civil
authority. The coverage is only provided if both of the following apply:
(a)
Access to the area immediately surrounding the damaged property is
prohibited by civil authority as a result of the damage; and

(b)
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.

15 (And see Grand Street Policy, pp. 72 & 142-143 (Extra Expense); pp. 72 & 143 (Civil Authority), pp. 73 & 144
(Extended Business Income); pp. 98-99 (Dependent Property), p. 145 (Ingress and Egress), pp. 83-84 & 146 (Sue and
Labor); Trezomare Policy, Policy, pp. 54 & 105-106 (Extra Expense); pp. 54 & 106 (Civil Authority), pp. 55 & 107
(Extended Business Income); pp. 80-81 (Dependent Property), p. 108 (Ingress and Egress), pp. 65-66 & 109 (Sue and
Labor); V’s Restaurant Policy, pp. 43 & 99-100 (Extra Expense); pp. 43 & 100 (Civil Authority); pp. 44 &101
(Extended Business Income; pp. 69-10 (Dependent Property); p. 102 (Ingress and Egress); and pp. 54-55 & 103 (Sue
and Labor).
Case 6:20-cv-03127-SRB Document 21 Filed 06/22/20 Page 16 of 33

(See, e.g., Studio 417 Policy, pp. 38 & 93) (emphasis added).16 Accordingly, Civil Authority
coverage requires, among other things, direct physical loss to property other than the insured’s
property and prohibition of access to the insured’s property as a result of that direct physical loss.
Likewise, the Ingress and Egress coverage only applies if the insured sustains actual loss
of Business Income and Extra Expense “caused by the prevention of existing ingress or egress at
[an insured premises] due to direct ‘loss’ by a Covered Cause of Loss at a location contiguous to
such ‘premises’.” (See, e.g., Studio 417 Policy, p. 95) (emphasis added).17 And, the Dependent
Property coverage only applies if the insured sustains actual loss of Business Income due to
suspension of its business “caused by direct ‘loss’ to ‘dependent property’.” The direct loss to
dependent property must in turn be “caused by or resulting from any Covered Cause of Loss.”
(See, e.g., Studio 417 Policy, pp. 63-65) (emphasis added).18 Accordingly, these additional
coverages require both a direct physical loss to contiguous or dependent property, and the
prevention of access to the insured’s property, or suspension of its business, as a result of that
direct physical loss.
ARGUMENT
I.
Motion to Dismiss Standard

Dismissal is an appropriate mechanism here because this motion presents a pure question
of law and contract interpretation. A motion to dismiss for failure to state a claim should prevail
if, after the complaint’s allegations are taken as true and all reasonable inferences are made in
favor of the nonmoving party, it appears beyond a doubt that the nonmoving party cannot prove
facts supporting his claim. Stodghill v. Wellston Sch. Dist., 512 F.3d 472, 476 (8th Cir. 2008).

16 (And see, Grand Street Policy, pp. 72 & 143; Trezomare Policy, pp. 54 & 106; V’s Restaurant Policy, pp. 43 &
100)
17 (And see, Grand Street Policy, p. 145; Trezomare Policy, p. 108; V’s Restaurant Policy, p. 102)
18 (And see, Grand Street Policy, pp. 97-99; Trezomare Policy, pp. 79-81; V’s Restaurant Policy, p. 69-70)
Case 6:20-cv-03127-SRB Document 21 Filed 06/22/20 Page 17 of 33

Stated another way, to survive a motion to dismiss, a complaint must contain sufficient factual
matter to show the claim for relief is “plausible on its face.” Varga v. U.S. Bank Nat. Ass’n, 764
F.3d 833, 838 (8th Cir. 2014).

Importantly, legal conclusions and other unsupported conclusions stated in the Complaint
may not be considered in determining a motion to dismiss. See, e.g., Glick v. W. Power Sports,
Inc., 944 F.3d 714, 717 (8th Cir. 2019) (“[W]e need not accept as true a plaintiff’s conclusory
allegations or legal conclusions drawn from the facts.”); Westcott v. City of Omaha, 901 F.2d 1486,
1488 (8th Cir. 1990) (“We do not . . . blindly accept the legal conclusions drawn by the pleader
from the facts.”); Granite Re, Inc. v. Nat’l Credit Union Admin. Bd., 956 F.3d 1041, 1044 (8th Cir.
2020) (“We do not accept [as true] the complaint’s legal conclusions.”).
It is proper, however, for the Court to consider the insurance Policies and Closure Orders,
which are incorporated by reference and integral to the Complaint. Miller v. Redwood Toxicology
Lab., Inc., 688 F.3d 928, 931, n. 3 (8th Cir. 2012) (the court may consider “matters incorporated
by reference or integral to the claim, items subject to judicial notice, matters of public record,
orders, items appearing in the record of the case, and exhibits attached to the complaint whose
authenticity is unquestioned” without converting a motion under Rule 12(b)(6) into one for
summary judgment.) Additionally, the Closure Orders are matters of public record.
Where, as here, the Complaint’s allegations are in conflict with the terms of the Policy and
the Closure Orders, the terms of the Policy and the Closure Orders control. See, e.g., 5 Charles
Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1327 & n. 22 (4th ed.) (Wright
& Miller) (“It appears to be well settled that when a disparity exists between the written instrument
annexed to the pleadings and the allegations in the pleadings, the terms of the written instrument
will control, particularly when it is the instrument being relied upon by the party who made it an
Case 6:20-cv-03127-SRB Document 21 Filed 06/22/20 Page 18 of 33

exhibit.”) (collecting cases).
II.
There Is No Direct Physical Loss and Accordingly There Is No Coverage

As shown, the Policy states that it only provides coverage where there is direct physical
loss. But, the Complaint does not allege facts showing any direct physical loss to any property.
Accordingly, Plaintiffs cannot possibly prove their claim.
A.
There Are No Facts to Show Plaintiffs’ Property was Physically Altered, thus
there is No Physical Loss
Plaintiffs are asking the Court to create coverage from whole cloth. That is not allowed in
Missouri, or Kansas. Cowin v. Shelter Mut. Ins. Co., 460 S.W.3d 76, 81 (Mo. Ct. App. 2015) (“A
court’s function is to construe, not make, insurance contracts.”); Geer v. Eby, 309 Kan. 182, 192,
432 P.3d 1001, 1009 (2019) (“The court shall not make another contract for the parties and must
enforce the contract as made.”). No case, in Missouri, Kansas or elsewhere, has held that a virus
constitutes direct physical loss. By contrast, numerous courts hold that direct physical loss requires
actual, tangible, permanent, physical alteration of property. See, e.g., Source Food Tech., Inc. v.
U.S. Fid. & Guar. Co., 465 F.3d 834 (8th Cir. 2006);10A Couch on Ins. § 148:46 (“The
requirement that the loss be ‘physical,’ given the ordinary definition of that term, is widely held to
exclude alleged losses that are intangible or incorporeal and, thereby, to preclude any claim against
the property insurer when the insured merely suffers a detrimental economic impact
unaccompanied by a distinct, demonstrable, physical alteration of the property.”) (Emphasis
added).
A seminal case concerning the direct physical loss requirement is Source Food Tech., Inc.
v. U.S. Fid. & Guar. Co., 465 F.3d 834 (8th Cir. 2006) (applying Minnesota law). There, the
insured, Source Food, was a U.S.-based supplier of beef products that sourced its beef product
production to a single supplier in Canada. Id. at 385. The U.S. government imposed an embargo
Case 6:20-cv-03127-SRB Document 21 Filed 06/22/20 Page 19 of 33

prohibiting the importation of Canadian beef and beef product after a cow in Canada tested
positive for mad cow disease. Id. Source Food lost a truckload of beef product, which was not
itself contaminated, when its Canadian supplier’s truck could not cross the border into the United
States. Id. As a result, Source Food could not obtain the beef product required to fill its orders
and lost its most valuable customer when it was unable to deliver the required one to two
truckloads of beef product per week. Id.
Source Food claimed lost business income under its insurance policy, which, like
Plaintiffs’ Policy, provided coverage if the suspension of business operations was “caused by
direct physical loss to Property”. Id. (Emphasis in original). Source Food argued that “the closing
of the border caused direct physical loss to its beef product because the beef product was treated
as though it were physically contaminated by mad cow disease and lost its function.” Id. at 836.
Thus, it could not be imported and sold. Source Food rejects this argument: “To characterize
Source Food’s inability to transport its truckload of beef product across the border and sell the beef
product in the United States as direct physical loss to property would render the word ‘physical’
meaningless.” Id. at 838. The claimed loss was an economic loss, not a physical loss.
To the same effect is Pentair, Inc. v. Am. Guarantee & Liab. Ins. Co., 400 F.3d 613 (8th
Cir. 2005) (applying Minnesota law). Pentair rejects the insured’s contention that its Taiwanese
suppliers’ inability to function after a loss of power constituted direct physical loss or damage.
Pentair, Inc., 400 F.3d at 616. Pentair holds that loss of use or function is relevant to determining
the amount of loss, but only once the insured first establishes physical loss or damage. Id. Pentair
holds that “Pentair’s argument, if adopted, would mean that direct physical loss or damage is
established whenever property cannot be used for its intended purpose.” (Emphasis in original).
Pentair’s argument was held to be wrong. Pentair, 400 R.3d at 616.
Case 6:20-cv-03127-SRB Document 21 Filed 06/22/20 Page 20 of 33

While Source Food and Pentair apply Minnesota law, they are well-reasoned cases.
Moreover, there are no material differences in Minnesota’s, Missouri’s and Kansas’s respective
decisions on pertinent insurance issues. Each state seeks to apply the plain meaning of an insurance
policy. See, e.g., Messina v. Shelter Ins. Co., 585 S.W.3d 839, 842–43 (Mo. Ct. App. 2019);
Depositors Ins. Co. v. Dollansky, 905 N.W.2d 513, 515 (Minn. Ct. App. 2017), aff’d, 919 N.W.2d
684 (Minn. 2018); Great Plains Ventures, Inc. v. Liberty Mut. Fire Ins. Co., 161 F. Supp. 3d 970,
976 & 979 (D. Kan. 2016). As such, it is appropriate for this Court to follow the sound construction
and application of the “direct physical loss” requirement in Source Food and Pentair.
The same result is obtained under Kansas law. See Great Plains Ventures, Inc. v. Liberty
Mut. Fire Ins. Co., 161 F. Supp. 3d 970, 978 (D. Kan. 2016) (Robinson, C.J.) (applying Kansas
law), reconsideration denied. Great Plains Ventures concerned a claim for insurance coverage for
cosmetic hail damage. Great Plains Ventures, 161 F. Supp. 3d at 975-976. The property insurance
policy there required “physical loss or damage” as a prerequisite to coverage. Id. at 978 & n. 44.
Great Plains Ventures holds that the phrase “physical loss or damage” “unambiguously” requires
physical alteration of property. Id. at 978-979 & n. 4.
Here, like Source Food, Pentair and Great Plains Ventures, the plain, unambiguous
language of the Plaintiffs’ Policies’ Business Income and related Extra Expense coverages require,
among other things, a suspension of Plaintiffs’ respective businesses caused by direct physical loss
to property at the Plaintiffs’ premises. The Plaintiffs seek insurance coverage for financial losses
they sustained as a result of what they summarily characterizes as “physical loss.” (See Compl. at
¶¶ 102-105). They allege that their businesses premises and other real estate suffered physical loss.
But, this is a legal conclusion that should not affect this dismissal motion.
The Complaint’s factual allegations show there was no physical loss to property. Plaintiffs
Case 6:20-cv-03127-SRB Document 21 Filed 06/22/20 Page 21 of 33

summarily allege that financial losses due to Coronavirus constitute physical loss. (Compl. at
¶¶ 102 & 104-105). But, Plaintiffs allege no facts showing that there was any physical alteration,
or structural degradation of their property. And, in any event, Plaintiffs concede they can allege no
facts to show Coronavirus was on their properties at all, let alone that it caused physical loss to
property. (See Compl. at ¶ 60) (speculating that “[i]t is likely customers, employees, and/or other
visitors to the insured property over the last two months were infected with the coronavirus and
thereby infected the insured property with the coronavirus.”). This fact alone is fatal to Plaintiffs’
claims.
Even if the Coronavirus was present on the Plaintiff’s’ premises, the facts alleged by
Plaintiffs and those subject to judicial notice also show the virus did not cause physical loss. The
Plaintiffs do not plead facts that show there has been any physical alteration to their property.
Rather, Plaintiffs allege that the virus is spread person to person. (Compl. at ¶ 53). They allege that
the virus can spread by being on surfaces in a building, or in the air. (Compl. at ¶¶ 52 & 54). They
acknowledge that the focus in combating this pandemic is on human to human transmission of the
virus. (See, e.g., Compl. at ¶ 66-67 & 80). Thus, Plaintiffs allege that “[t]o reduce the spread of the
disease” the CDC has urged businesses to “clean and disinfect all surfaces, prioritizing the most
frequently touched surfaces.” (Compl. at ¶ 61). Humans infecting humans—through direct contact,
or otherwise—is not direct physical loss to property.
As shown, Plaintiffs ask this Court to vastly expand Missouri and Kansas insurance law.
In essence, Plaintiffs assert that the Policies’ direct physical loss requirement is met whenever a
business suffers economic harm. On this fundamental issue, the instant case cannot be
distinguished from Source Food, Pentair, Great Plains Ventures, or the host of other cases holding
that direct physical loss requires actual, tangible, permanent, physical alteration of property and
Case 6:20-cv-03127-SRB Document 21 Filed 06/22/20 Page 22 of 33

that the direct physical loss must cause a suspension of business operations for the Business
Income and Extra Expense coverages to apply.
B.
American Case Law Is Overwhelmingly Consistent With Source Food,
Pentair, and Great Plains Ventures.

Like Source Food, Pentair, and Great Plains Ventures, courts throughout the country
construe the “direct physical loss” requirement to preclude coverage in the absence of
demonstrable, physical alteration of the insured’s property. See, e.g., 10A Couch on Ins. § 148:46,
supra (collecting cases); Social Life Magazine, Inc. v. Sentinel Ins. Co., Ltd., 1:20-cv-03311-VEC
(S.D.N.Y.), ECF No. 24-1 at pp. 5 & 15 (the Coronavirus damages lungs; not printing presses.)19;
Mastellone v. Lightning Rod Mut. Ins. Co., 2008-Ohio-311, ¶ 61, 175 Ohio App. 3d 23, 40, 884
N.E.2d 1130, 1143 (mold on building siding did not constitute physical injury because it did not
adversely affect the building’s structural integrity). See also, Philadelphia Parking Auth. v. Fed.
Ins. Co., 385 F. Supp. 2d 280, 289 (S.D.N.Y. 2005) (no direct physical loss to an airport parking
facility that was closed following 9/11); Crestview Country Club, Inc. v. St. Paul Guardian Ins.
Co., 321 F. Supp. 2d 260, 264 (D. Mass. 2004), (modification of a hole on a golf course because
of the loss of a tree did not constitute direct physical loss to the course).
As shown, Plaintiffs do not allege a single fact to show any physical alteration to their
property. Instead, they allege that in response to COVID-19, Missouri and Kansas issued Closure
Orders that required Plaintiffs to “cease and/or significantly reduce operations” at their premises.
(Compl., ¶¶ 81, 106-107). This is not direct physical loss. Thus, based on the law nationally, there
is no Business Income or Extra Expense coverage.

19 No written opinion has been issued in Social Life at the time of filing this brief. A copy of the hearing transcript is
available through the Federal Court’s filing system, PACER. A file-stamped copy of the hearing transcript reflecting
the Court’s ruling and rationale is attached as Exhibit E. A court considering a motion to dismiss may take judicial
notice of judicial opinions and public records accessible from the internet. Johnson v. Spencer, 950 F.3d 680, 705 (10th
Cir. 2020).
Case 6:20-cv-03127-SRB Document 21 Filed 06/22/20 Page 23 of 33

C.
Coronavirus Does Not Affect the Structural Integrity of Property; It Can Be
Removed by Cleaning

Additionally, there is no direct physical loss in situations where a contaminant or substance
can be cleaned. See, e.g., Mastellone, 2008-Ohio-311, ¶ 68; Mama Jo’s, Inc. v. Sparta Ins. Co.,
2018 WL 3412974, at *9 (S.D. Fla. June 11, 2018) (“[W]ith regards to Plaintiff’s initial claim for
cleaning, cleaning is not considered direct physical loss.”); Universal Image Prods., Inc. v. Chubb
Corp., 703 F.Supp.2d 705, 710 (E.D. Mich. 2010) (a complete cleaning of a ventilation system
was not a direct physical loss), aff’d, 475 Fed.Appx. 569 (6th Cir. 2012).
Mastellone in particular, is very close, factually, to the present case. The relevant policy
language in Mastellone was the same as that in the Cincinnati Policies. It too required “direct
physical loss,” also referred to in Mastellone as physical injury to property. Id. at ¶¶ 61-62.
Mastellone holds that mold on building siding did not constitute physical injury because it did not
adversely affect the building’s structural integrity. In this context, Mastellone rejected the
argument that dark staining on the siding was physical injury, because the staining was “only
temporary and did not affect the structure of the wood.” Id. at ¶ 63. The mold could be removed
via cleaning, and its presence “did not alter or otherwise affect the structural integrity of the
siding.” Id. at ¶¶ 61-69, citing 10A Couch on Ins. § 148:46 (3d Ed.1998).
Similarly here, the alleged presence of the Coronavirus did not cause direct physical loss
to property. The loss Plaintiffs allege is caused by the presence of the virus in our world, not by
any physical damage or effect on Plaintiffs’ premises or someone else’s property. Indeed, premises
where the virus has been confirmed to be present, such as hospitals and nursing homes, have
remained open. This is because those properties are themselves undamaged. Here, again, Plaintiffs
admit they have no evidence the Coronavirus was in fact present on their premises. (See Compl.
at ¶ 60).
Case 6:20-cv-03127-SRB Document 21 Filed 06/22/20 Page 24 of 33

Additionally, even if present on Plaintiffs’ premises, the Coronavirus did not affect the
structural integrity of the building, and Plaintiffs admit that it could be removed by cleaning. (See
Compl. at ¶ 61). Indeed, the Centers for Disease Control and Prevention (CDC) has instructed that
the Coronavirus can be wiped off surfaces by cleaning. “The virus that causes COVID-19 can be
killed if you use the right products. EPA has compiled a list of disinfectant products that can be used
against COVID-19, including ready-to-use sprays, concentrates, and wipes.” (See CDC Reopening
Guidance for Cleaning and Disinfecting (4/28/2020), attached as Ex. C; See also CDC, Cleaning
and Disinfection for Households, https://www.cdc.gov/coronavirus/2019-ncov/prevent-getting-
sick/cleaning-disinfection.html (accessed June 20, 2020)).20 Thus, as in Mastellone, even if there is
actual presence of the Coronavirus, there is no direct physical loss because the virus either dies
naturally in days, or it can be wiped away.
Plaintiffs admit that cleaning will remove the Coronavirus. (See Compl. at ¶ 61). Therefore,
Plaintiffs admit there is no direct physical loss here.
D.
The Lack of a Virus Exclusion Is Irrelevant Because There Is No Direct
Physical Loss

The Plaintiffs claim that coverage exists because the Policies do not contain a virus
exclusion. That assertion is legally incorrect. An exclusion can become relevant only if Plaintiffs
first meet their burden of showing that there is direct physical loss. As established, Plaintiffs cannot
do so. Thus, Plaintiffs cannot fulfill the threshold requirement for a Covered Cause of Loss.
Covered Cause of Loss means all risks of direct physical loss that are neither excluded nor limited.
Thus, if there is no direct physical loss in the first place, the existence or absence of a virus
exclusion is irrelevant.

20 Again, this Court may take judicial notice of the CDC reports and other matters of public record. See, e.g., Stutzka,
420 F.3d at 760, n. 2 (8th Cir. 2005).

Case 6:20-cv-03127-SRB Document 21 Filed 06/22/20 Page 25 of 33

For example, in Ward Gen. Ins. Servs., Inc. v. Employers Fire Ins. Co., 114 Cal. App. 4th
548, 555, 7 Cal. Rptr. 3d 844, 850 (2003), there was a database crash. There was no direct physical
loss. Therefore, it was “unnecessary to analyze the various exclusions and their application to this
case.” Similarly, in Newman Myers Kreines Gross Harris, P.C. v. Great N. Ins. Co., 17 F. Supp.
3d 323, 333 (S.D.N.Y. 2014), citing Roundabout Theatre Co. v. Cont’l Cas. Co., 302 A.D.2d 1, 9,
751 N.Y.S.2d 4, 10 (2002), a law firm closed because of a power outage. The loss of power was
not a direct physical loss. Because there was no direct physical loss, it was unnecessary to decide
whether a flood exclusion applied. See also Zinser v. Auto-Owners Ins. Co., 2017-Ohio-5668, ¶
33 (Ohio App.).
In sum, there is no coverage here because there is no direct physical loss. For that reason,
no exclusion is needed.
III.
There Is No Civil Authority Coverage
As established, the Policies’ Civil Authority coverage only applies if there is a Covered
Cause of Loss, meaning direct physical loss, to property other than the Plaintiffs’ property. Even
then, there is only Civil Authority coverage if both of these additional requirements are met: a)
access to the area immediately surrounding the damaged property is prohibited by civil authority
as a result of the damage; and b) the action of civil authority is taken in response to dangerous
physical conditions resulting from the direct physical loss. “[L]osses due to curfew and other such
restrictions are not generally recoverable. * * * If a policy provides for business interruption
coverage where access to an insured’s property is denied by order of civil authority, access to the
property must actually be specifically prohibited by civil order, not just made more difficult or less
desirable.” 11A Couch on Ins. § 167:15.

Case 6:20-cv-03127-SRB Document 21 Filed 06/22/20 Page 26 of 33

A.
There is No Direct Physical Loss to Other Property

Cincinnati has demonstrated that direct physical loss to property other than the Plaintiffs’
property is necessary. Courts nationwide have upheld that requirement. See Kelaher, Connell &
Conner, P.C. v. Auto-Owners Ins. Co., 2020 WL 886120, 8 (D.S.C. Feb. 24, 2020); Not Home
Alone, Inc. v. Philadelphia Indem. Ins. Co., 2011 WL 13214381, 6 (E.D. Tex. Mar. 30, 2011); S.
Texas Med. Clinics, P.A. v. CNA Fin. Corp., 2008 WL 450012, 10 (S.D. Tex. Feb. 15, 2008);
United Air Lines, Inc. v. Ins. Co. of State of PA, 439 F.3d 128, 131 (2d Cir. 2006).
Just as the Coronavirus is not causing direct physical loss to Plaintiffs’ premises, it is not
causing direct physical loss to other property. The Complaint fails to identify any direct physical
loss, anywhere. Rather, it alleges Coronavirus and related Closure Orders have required their
respective businesses, and the businesses of unidentified others, to “cease and/or significantly
reduce operations.” (See, e.g., Compl. at ¶ 106). No facts are alleged that demonstrate that these
things happened because of direct physical loss to anybody’s property. Instead, closing or limiting
of business operations protected the public from human to human transmission of the virus.
Plaintiffs also assert that “State and local governmental authorities and public health
officials around the United States acknowledge that COVID-19 and the Pandemic cause direct
physical loss and damage to property.” (Compl. at ¶ 108). This is inaccurate. None of the orders
Plaintiffs rely on stated the Coronavirus causes “direct physical loss” or “direct physical damage”
to property. However, even if they had, the meaning of the Policies’ “direct physical loss”
requirement is a question of law for the Court, which must be based on the language of the Policies
and the facts of each individual claim. That meaning should not be based on blanket statements by
politicians that supply no scientific basis for the statements. Regardless, as Source Food, Pentair,
Great Plains Ventures, and other authorities show, structural damage is necessary for there to be
Case 6:20-cv-03127-SRB Document 21 Filed 06/22/20 Page 27 of 33

direct physical loss. Accordingly, there is no coverage here.
There are no alleged facts asserting any direct physical loss. There are no alleged facts
showing any change or alteration of anybody’s physical property by the Coronavirus. There are,
however, as admitted in the Complaint, facts showing that the Coronavirus can be removed via
cleaning. As established, this is the marker of something that is not direct physical loss.
Accordingly, there is no direct physical loss to any other property as is required for Civil Authority
coverage.
B.
The Requisite Prohibition of Access Is Lacking

The Civil Authority coverage also requires that access to Plaintiffs’ premises be prohibited
by an order of Civil Authority. But, none of the orders Plaintiffs allege prohibit access to their
premises. To the contrary, the Plaintiffs admit—as they must—that the Closure Orders allowed
restaurant premises to remain open for food preparation, take-out, and delivery. (See Compl. at ¶¶
73, 76, 78-80 & 93). Likewise, Plaintiffs concede that the Closure Orders did not prohibit access
to salon premises. (See Compl. at ¶ 67). Based on the lack of such a prohibition here, there is no
Civil Authority coverage.
This position is established by law nationally. There is no Civil Authority coverage unless
there is an order prohibiting access to the insured’s premises. For example, in Southern Hospitality,
Inc., Inc. v. Zurich Am. Ins. Co., 393 F.3d 1137 (10th Cir. 2004) (applying Oklahoma law), the
plaintiff managed a number of hotels throughout the country. S. Hosp., Inc., 393 F.3d at 1138. Its
revenues and profits plummeted when the FAA grounded all flights in the United States following
9/11. Id. Southern Hospitality holds there is no civil authority coverage because the orders
prohibited flights, not access to hotels. Likewise, in Ski Shawnee, Inc. v. Commonwealth Ins. Co.,
2010 WL 2696782, 4 (M.D. Pa. July 6, 2010), a bridge repair hindered or dissuaded the majority
Case 6:20-cv-03127-SRB Document 21 Filed 06/22/20 Page 28 of 33

of customers from visiting a ski resort. Ski Shawnee holds that did not constitute prohibition of
access to the premises. See also, e.g., Syufy Enterprises v. Home Ins. Co. of Indiana, 1995 WL
129229, 2 (N.D. Cal. Mar. 21, 1995) (riot-related curfew prevented insured’s customers from being
out and about, it did not prohibit access to the insured’s premises); Bros., Inc. v. Liberty Mut. Fire
Ins. Co., 268 A.2d 611, 614 (D.C. 1970) (same); Schultz Furriers, Inc. v Travelers Cas. Ins. Co.
of America, 2015 WL 13547667, 6 (N.J. Super. L. July 24, 2015) (despite serious traffic issues in
lower Manhattan following Superstorm Sandy, it was not completely impossible for the public to
access the insured store). See also Goldstein v Trumbull Ins. Co., 2016 WL 1324197, 12 (N.Y.
Sup. Ct. Apr. 05, 2016); TMC Stores, Inc. v. Federated Mut. Ins. Co., 2005 WL 1331700, 4 (Minn.
Ct. App. June 7, 2005).
Here, Plaintiffs admit that access to restaurant premises was not prohibited. They were
permitted to remain open to provide food preparation, take-out, delivery and drive-thru services.
(See Compl. at ¶¶ 73, 76, 78-80 & 93). Likewise, the Court may take judicial notice of the fact that
under the Closure Orders discussed in the Complaint non-essential businesses, such as Plaintiff
Studio 417’s salons, remained open and accessible to owners, employees and others as required to
perform “Minimum Basic Operations,” including, but not limited to activities necessary to
maintain the value of the business’s inventory and facilities, process payroll, and facilitate
employees’ ability to work remotely. (See Compl. at ¶¶ 65-74).21
Because the Complaint’s allegations establish access was not prohibited, the Civil
Authority coverage does not apply.

21 All of Studio 417’s salons are in Missouri. Copies of the Missouri Closure Orders are public records, and available
via the internet. See, e.g., https://www.greenecountymo.gov/files/PDF/file.pdf?id=35369 (Springfield, Mar. 24,
2020);
https://www.springfieldmo.gov/DocumentCenter/View/48367/Greene-County-Stay-at-Home-Order
(Springfield, Apr. 6, 2020); https://www.kcmo.gov/home/showdocument?id=4065 (Kansas City, Mar. 21, 2020);
https://www.kcmo.gov/home/showdocument?id=4139 (Kansas City, Apr. 16, 2020).
Case 6:20-cv-03127-SRB Document 21 Filed 06/22/20 Page 29 of 33

IV.
There Is No Ingress and Egress Coverage
The Ingress and Egress coverage requires both a direct physical loss at a location
contiguous to the insured’s property and the prevention of access to the insured’s property as a
result of that direct physical loss. As Cincinnati has demonstrated, the Complaint does not allege
any facts that show direct physical loss at any location, let alone at a location contiguous to
Plaintiffs’ premises. Moreover, even if the alleged “likely” presence of the Coronavirus resulted
in direct physical loss, which it did not, that presence certainly did not prevent access to the insured
premises.
Regardless, even in the event the Closure Orders prevented access to Plaintiffs’ premises,
and they did not, the Policies unambiguously state that the Ingress and Egress coverage “does not
apply if ingress or egress from the ‘premises’ is prohibited by civil authority.” (Studio 417 Policy,
p. 95).22 Here, the Closure Orders issued by civil authorities are the only identified cause of
Plaintiffs’ alleged losses. Because the Complaint’s allegations establish access to Plaintiffs’
premises was not prevented, the Ingress and Egress coverage does not apply.
V.
There Is No Dependent Property Coverage

The Dependent Property coverage requires both a direct physical loss to dependent
property and a necessary suspension of the insured’s business as a result of that direct physical
loss. The Policies define “dependent property” to include property operated by others whom the
insured depends on to deliver material or services to it, accept its products or services, manufacture
products for delivery to its customers, or attract customers to its business. (See, e.g., Studio 417
Policy, p. 64).23

Here, again, the Complaint does not allege any facts that show direct physical loss at any

22 (See also Grand Street Policy, p. 145; Trezomare Policy, p. 108; V’s Restaurant Policy, p.102).
23 (See also Grand Street Policy, p. 98; Trazomare Policy, p. 80; V’s Restaurant Policy, p. 69).
Case 6:20-cv-03127-SRB Document 21 Filed 06/22/20 Page 30 of 33

location, let alone at a dependent property. Moreover, there are no allegations that there was a
necessary suspension of the Plaintiffs’ businesses because of the lack of material or services
deliveries. Accordingly, there is no Dependent Property coverage.
VI.
There Is No So-Called Sue and Labor Coverage

The Policies impose on Plaintiffs certain “Duties in the Event of Loss or Damage.” Among
other things, the Plaintiffs are required to protect Covered Property from further damage and keep
a record of expenses incurred to protect the Covered Property for consideration in the settlement
of the claim (“the Preservation of Property Clause”). (See, e.g., Studio 417 Policy, p. 49-50 &
96).24 Plaintiffs refer to this provision as the “Sue and Labor coverage.” Plaintiffs contend,
incorrectly, that the “Sue and Labor coverage” applies to exclusively financial losses caused by
the Coronavirus.

As an initial matter, the Preservation of Property Clause is not an additional coverage.
Instead, it imposes a duty on the insured to prevent further damage to the extent reasonably
possible in the event of a Covered Cause of Loss. The insured can recover these expenses in such
a circumstance. However, the Policies’ Preservation of Property Clause expressly provides: “[I]n
no event will we pay for any subsequent ‘loss’ resulting from a cause of loss that is not a Covered
Cause of Loss.” (See, e.g., Studio 417 Policy, p. 49-50 & 96).25
There is no Covered Cause of Loss here because, as demonstrated above, there is no direct
physical loss to Plaintiffs’ Covered Property. Thus, the Policies’ so-called Sue and Labor coverage
does not apply.

24 (See also Grand Street Policy, pp. 83-84 & 146; Trezomare Policy, pp. 65-66 & 109; V’s Restaurant Policy, pp. 54-
55 & 103).
25 (See also Grand Street Policy, pp. 83-84 & 146; Trezomare Policy, pp. 65-66 & 109; V’s Restaurant Policy, pp. 54-
55 & 103).
Case 6:20-cv-03127-SRB Document 21 Filed 06/22/20 Page 31 of 33

Conclusion

There is no possible coverage because the Coronavirus does not cause direct physical loss.
In the absence of direct physical loss, and for the other reasons discussed above, Plaintiffs have
not alleged a claim on which relief can be granted. Accordingly, Cincinnati respectfully requests
that its Motion to Dismiss be granted.
June __, 2020

Respectfully submitted by:
BY: /s/ Michael L. Brown
WALLACE SAUNDERS, P.C.
Michael L. Brown MO 55732
Kelvin J. Fisher MO 56573
10111 West 87th Street
Overland Park, KS 66212
(913) 888-1000 FAX - (913) 888-1065
mbrown@wallacesaunders.com
kfisher@wallacesaunders.com

ATTORNEYS FOR DEFENDANT THE
CINCINNATI INSURANCE COMPANY

Case 6:20-cv-03127-SRB Document 21 Filed 06/22/20 Page 32 of 33

I hereby certify that on June 22, 2020, I
electronically filed the foregoing document with
the Clerk of the Court using the CM/ECF system
which will send a notice of electronic filing to:

Brandon J.B. Boulware
Boulware Law LLC
1600 Genessee Street, Suite 416
Kansas City, MO 64102
brandon@boulware-law.com

Todd Johnson
Votava Nantz & Johnson, LLC
9237 Ward Parkway, Suite 240
Kansas City, MO 64114
tjohnson@vnjlaw.com

Jack Thomas Hyde
Wagstaff & Cartmell
4740 Grand Ave., Suite 300
Kansas City, MO 64112
jhyde@wcllp.com

Thomas A. Rottinghaus
Wagstaff & Cartmell
4740 Grand Ave., Suite 300
Kansas City, MO 64112
trottinghaus@wcllp.com

Tyler Hudson
Wagstaff & Cartmell
4740 Grand Ave., Suite 300
Kansas City, MO 64112
thudson@wcllp.com

ATTORNEYS FOR PLAINTIFFS

Case 6:20-cv-03127-SRB Document 21 Filed 06/22/20 Page 33 of 33

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Defendant’s Suggestions in Support of Its Motion to Dismiss — Studio 417 v. Cincinnati Insurance

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