5th Cir. / COVID-19

Barbeque Restaurants Failed to Allege Direct Physical Damage

The United States Court of Appeals for the Fifth Circuit, applying Texas law, affirmed the District Court’s dismissal of two insured restaurants’ claims for coverage in the wake of government shutdowns resulting from the COVID-19 pandemic. The Fifth Circuit instead held that the insureds, Terry Black’s Barbeque L.L.C. and Terry Black’s Barbeque Dallas, L.L.C. (collectively, “TBB”), had not suffered any tangible or physical damage or loss that would trigger coverage based on the business income and extra expense provisions in their identical but separate policies with State Automobile Mutual Insurance Company. Moreover, the Fifth Circuit held that the policy’s restaurant extension endorsement, which provides coverage for suspension of business due to the order of a civil authority resulting from actual or alleged exposure of the business’ premises to a contagious disease was inapplicable, because the Texas government issued its shutdown orders as a result of the COVID-19 pandemic generally, as opposed to any actual exposure to the insureds’ specific premises. As a result, the Fifth Circuit became the eighth United States circuit to hold that the COVID-19 pandemic did not cause physical or tangible alteration or deprivation of property. Terry Black’s Barbecue, L.L.C. v. State Automobile Mut. Ins. Co., 21-50078, 2022 WL 43170 (5th Cir. Jan. 5, 2022).