In Fontainebleau Florida Hotel LLC v. Westchester Surplus Lines Insurance Co., No. 3D23-1264 (Fla. 3d DCA Mar. 19, 2025), the Third District Court of Appeal affirmed a trial court’s dismissal of business interruption claims arising from the COVID-19 pandemic. The business owners of the Fontainebleau Florida Hotel alleged their pandemic-related losses were covered under the Business Interruption provisions of their insurance policies. The insurers denied coverage, citing the absence of any “direct physical loss” or property damage as required by the policy language.
The court reviewed the case de novo and focused on interpreting the language of the underlying insurance policies. It found that the policies’ Business Interruption clauses were expressly linked to the “Perils Insured Against” provision, which required “direct physical loss” or property damage. Because the business owners did not allege such physical loss or damage, the court concluded the losses fell outside the scope of covered perils.
The court rejected the argument that Business Interruption coverage existed independently of direct physical loss, emphasizing that insurance contracts must be read as a whole and given their plain meaning. Citing both Florida precedent and insurance treatises, the court affirmed that business interruption coverage only applies when a covered peril causes actual property damage. The ruling further noted that any claim under a pollution policy was not properly pleaded and thus not preserved for review.
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