COVID ≠ “Physical Loss”

Terry Black’s Barbecue provides outstanding Texas barbecue from its location in Dallas’s Deep Ellum neighborhood; it also experienced business interruptions from complying with various stay-at-home orders issued during the COVID-19 pandemic in 2020. The Fifth Circuit affirmed the district court’s conclusion that Terry Black’s did not have business-interruption coverage because it did not suffer a direct physical loss of property at its restaurants. The Court reasoned:

…  A “physical loss of property” cannot mean something as broad as the “loss of use of property for its intended purpose.” None of those words fall within the plain meaning of physical, loss, or property. And that phrase has an entirely different meaning from the language in the BI/EE provision. “Physical loss of property” is not synonymous with “loss of use of property for its intended purpose.”
We conclude the Texas Supreme Court would interpret a direct physical loss of property to require a tangible alteration or deprivation of property. Because the civil authority orders prohibiting dine-in services at restaurants did not tangibly alter TBB’s restaurants, and TBB having failed to allege any other tangible alteration or deprivation of its property, the policy does not provide coverage for TBB’s claimed losses.

Terry Black’s Barbecue BBQ, LLC v. State Automobile Mut. Ins. Co., No. 21-50078 (Jan. 5, 2022).