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DISTRICT OF COLUMBIA COURT OF APPEALS
No. 22-CV-0950
CREATIVE CONSOLIDATION, LLC D/B/A MASSERIA RESTAURANT, et al., APPELLANTS
v.
ERIE INSURANCE EXCHANGE, APPELLEE.
Appeal from the Superior Court of the District of Columbia (2022-CA-001109-B)
(Hon. Shana Frost Matini, Trial Judge)
(Argued February 14, 2024 Decided March 21, 2024)
Matthew J. Schlesinger, with whom Dustin Cho, Scott J. Levitt, Georgia Kazakis and Tyler Weinblatt were on the brief, for appellants.
George E. Reede, with whom Jessica E. Port and Bryant S. Green were on the brief, for appellee.
Lorelie S. Masters and Michael S. Levine of Hunton Andrews Kurth, LLP filed a brief on behalf of the Medical Society of the District of Columbia as amicus curiae.
Rhonda D. Orin and Marshall Gilinsky of Anderson Kill P.C. filed a brief on behalf of United Policyholders as amicus curiae.
Laura A. Foggan of Crowell & Moring LLP filed a brief on behalf of The American Property Casualty Insurance Association as amicus curiae. 2
Before BLACKBURNE-RIGSBY, Chief Judge, and DEAHL and SHANKER, Associate Judges.
BLACKBURNE-RIGSBY, Chief Judge: Appellants are ten restaurants and bars 1
across the District of Columbia and Virginia that closed their businesses to in-person
dining in spring 2020 due to the COVID-19 pandemic. On appeal, they seek review
of the trial court’s dismissal of their claims for business interruption and civil
authority coverage under identical “all-risk” Erie Insurance Exchange (“Erie”)
Ultrapack Plus insurance policies (the “Policy”). Distinguishing their arguments
from those made by other area restaurants in our decision in Rose’s 1, LLC v. Erie
Insurance Exchange, 290 A.3d 52 (D.C. 2023), appellants assert that the presence
of the COVID-19 virus itself, rather than municipal orders, caused “direct physical
loss of or damage to Covered Property” entitling them to coverage under the Policy.
We disagree and affirm the trial court’s dismissal of their claims.
1 Creative Consolidation, LLC (d/b/a Masseria Restaurant), Flying Donkey, LLC (d/b/a SER Restaurant), Joselito, LLC (d/b/a Joselito Casa de Comidas), Maxwell Park, Maxwell Yard (d/b/a Maxwell Park), Nussbar, LLC (d/b/a Shouk), Officina Café, LLC, Officina LLC (d/b/a, Officina by Nicholas Stefanelli), Pamplona, LLC, and Sloppy Mama’s, LLC. 3
I. Background
A. The COVID-19 Virus
Appellants’ complaint states that a person infected with COVID-19 sheds the
virus onto surfaces they touch, after touching their eyes or nose, and into the air they
breathe, and cites to scientific studies for the following statements about the
COVID-19 virus. With incubation periods extending up to fourteen days, people
can contract the COVID-19 virus before they present with its symptoms. Others
may become infected without exhibiting symptoms at all. Asymptomatic and pre-
symptomatic individuals can still transmit the virus, and in some cases can have a
higher concentration of the virus than those who are symptomatic. Typically
secreted by way of droplets or aerosol particles, the virus is particularly transmissible
in indoor spaces, like restaurants or bars, where people sit in close proximity without
masks. Although cleaning surfaces can remove some of the virus, doing so does not
eliminate possible transmission where the virus is present in the air or continually
reintroduced by other infected people. The virus can survive for at least seven days
on common surfaces at room temperature. 4
B. Local Government COVID-19 Orders
On March 16, 2020, District of Columbia Mayor Muriel Bowser issued the
first of several orders prohibiting all in-person indoor dining. Over the next several
months, additional orders by Mayor Bowser required District of Columbia
restaurants to maintain six-foot distances for lines of take-out customers, regularly
disinfect high-touch surfaces, and post their disinfection protocols for customers to
see. In May and June 2020, Mayor Bowser issued reopening orders that allowed
restaurants to open first for outdoor dining with tables six feet apart and then for
indoor dining at 5 % occupancy or below.
Virginia’s Governor Ralph Northam also issued a series of executive orders
affecting restaurant operation during the COVID-19 pandemic. 2 A March 17, 2020
order restricted restaurants to ten or fewer diners, and subsequent orders limited any
gathering to ten people and required the closure of restaurants. Across phases of
reopening for the state, Governor Northam issued executive orders in May and June
2020 that mandated cleaning protocols and allowed restaurants first to operate at
50% occupancy of any outdoor spaces, then 50% of indoor occupancy, and later full
operation with diners seated at least six feet apart.
2 Several of the restaurants among appellants are located and organized in Virginia and were thus subject to Governor Northam’s executive orders. 5
C. The Policy
Appellants each purchased an “all-risks” insurance policy from Erie with start
dates ranging from April 2019 to May 2020. Each appellant purchased Erie’s
Ultrapack Plus Policy. The Policy states that Erie “will pay for direct physical ‘loss’
of or damage to Covered Property at the premises described in the ‘Declarations’
caused by or resulting from a peril insured against.” The Policy defines “loss” as
“direct and accidental loss of or damage to covered property.”
Under its “Income Protection – Coverage 3” section, the Policy contains
provisions for income-protection coverage, extra-expense coverage, and civil-
authority coverage. The income-protection provision covers “loss of ‘income’
and/or ‘rental income’ [sustained] due to partial or total ‘interruption of business’
resulting directly from ‘loss’ or damage to property on the premises described in the
‘Declarations’ from a peril insured against.”
Similarly, the extra-expense provision covers “necessary expenses [incurred]
due to partial or total ‘interruption of business’ resulting directly from ‘loss’ or
damage to property on the premises described in the ‘Declarations’ from a peril
insured against.” The Policy defines “interruption of business” as “the period of
time” beginning “with the date of direct ‘loss’ to covered property” and lasting until
“the date when the covered property should be repaired, rebuilt, or replaced with
reasonable speed and similar quality.” 6
The civil-authority coverage provision, listed under the section’s “Additional
Coverages,” states that “[w]hen a peril insured against causes damage to property
other than property at the premises described in the ‘Declarations’,” Erie “will pay
for the actual loss of ‘income’ and/or ‘rental income’ [sustained] and necessary
‘extra expense’ caused by action of civil authority that prohibits access to the
premises.”
D. Trial Court Ruling
When appellants sought payment through the Policy for lost business income
due to the COVID-19 pandemic, Erie denied them coverage. Appellants then filed
a complaint in Superior Court against Erie, arguing that the losses they suffered were
covered under the Policy. Appellants argued that they were unable to use their
properties for their intended purpose “absent extensive repairs and remedial
measures” and the “need to mitigate the threat or actual physical presence of the
virus on door-handles, tables, silverware, surfaces, in heating and air conditioning
systems and any other of the multitude of places the virus has or could be found.”
Erie filed a motion to dismiss appellants’ complaint, which the Superior Court
granted. The Superior Court reasoned that the restaurants’ complaint fell short of
stating plausible facts establishing that COVID-19 caused them physical damage to
trigger coverage under their Erie policy. 7
The trial court order, which predates our decision in Rose’s 1, LLC v. Erie
Insurance Exchange, 290 A.3d 52 (D.C. 2023), also rejected the restaurants’
argument that the loss of the use of their property due to the COVID-19 pandemic
and associated municipal orders was covered under the policy, finding instead that
a “direct physical loss” under the Policy requires “physical alteration.” Given our
subsequent holding in Rose’s 1 that “‘[d]irect physical loss of or damage’ requires a
tangible, material alteration or change to covered property,” id. at 59, appellants do
not make this argument on appeal.
Discussion
We review a grant of a motion to dismiss de novo. E.g., In re Est. of Curseen,
890 A.2d 191, 193 (D.C. 2006). Like the trial court, we accept the complaint’s
allegations as true and construe facts and inferences in favor of the plaintiff. Solers,
Inc. v. Doe, 977 A.2d 941, 947 (D.C. 2009). To survive a motion to dismiss, a
pleading must include well-pleaded factual allegations that plausibly give rise to an
entitlement for relief. Mazza v. Housecraft, LLC, 18 A.3d 786, 790 (D.C. 2011)
(adopting Iqbal pleading standard). Factual allegations “must be enough to raise a
right to relief above the speculative level.” Pietrangelo v. Wilmer Cutler Pickering
Hale & Dorr, LLP, 68 A.3d 697, 709 (D.C. 2013) (citing Clampitt v. Am. Univ., 957
A.2d 23, 29 (D.C. 2008)). At the motion to dismiss stage, the legal sufficiency of 8
the complaint is the only issue on review, not the merits of the plaintiff’s claim.
Grayson v. AT&T Corp., 15 A.3d 219, 228-29 (D.C. 2011).
Any ambiguous terms in an insurance policy “are construed against the insurer
and in favor of ‘the reasonable expectations of the purchaser of the policy.’” Chase
v. State Farm Fire and Cas. Co., 780 A.2d 1123, 1127 (D.C. 2001) (quoting Smalls
v. State Farm Mut. Auto. Ins. Co., 678 A.2d 32, 35 (D.C. 1996)). “Nonetheless, the
reasonable expectations doctrine is not a mandate for courts to rewrite insurance
policies and reallocate their assignment of risks between insurer and insured.” Id. at
1132.
A. Contamination Theory
Subsequent to the trial court’s order, we had occasion in Rose’s 1, 290 A.3d
at 52, to review on appeal the question of whether restaurants are entitled to
insurance coverage for their loss of income during the COVID-19 pandemic under
the same Erie policy. In Rose’s 1, a group of other area restaurants appealed the trial
court’s grant of summary judgment to Erie, arguing that their loss of income due to
the mandated COVID-19 closures was a “direct physical loss of or damage to” their
property covered by the policy. Id. While the contamination theory was not raised
by the parties in Rose’s 1, we acknowledged that other state courts that had relied on
such a theory at the motion-to-dismiss stage “require[d] ‘express[] aver[ment]’ that
COVID-19 was present” to find that the COVID-19 virus itself caused a physical 9
loss. Id. at 64 (quoting SWB Yankees, LLC v. CAN Fin. Corp., 2021 WL 3468995,
at *17 (Pa. C.P. Aug 4, 2021)). Because the appellants in Rose’s 1 did not make
such an argument, we found that “without further argument and consideration, we
could not say that the allegation of active presence of COVID-19 in a business
constitutes ‘direct physical loss or damage.’” Rose’s 1, 290 A.3d at 64, n. 21.
Here, appellants seek to distinguish their arguments from those made by the
parties in Rose’s 1 by relying on the contamination theory argument we reserved
there. Id. Appellants allege that they suffered a “physical loss or damage” covered
by the Policy because the COVID-19 virus physically altered their property. Their
complaint states that the virus’s droplets physically alter the chemical makeup of
indoor air and that its spike proteins bind to surfaces to change their molecular
makeup. Appellants contend that the facts pled in their complaint cite up-to-date
scientific knowledge about the virus’s form (“[d]roplet nuclei are usually smaller
than 5 microns, invisible to the naked eye and remain suspended in the air
(‘aerosolized’) for significant periods”), incubation period (“the concentration of
virus in . . . pre-symptomatic individuals can be higher than the viral loads in
symptomatic individuals”), and transmissibility (“[p]ersons with COVID-19 expel
the COVID-19 virus as they talk, cough, sneeze, or even just breathe”; “particles
[can] also be deposited by individuals infected by the COVID-19 virus when they
touch surfaces after touching their eyes or nose”). 10
Courts across the country have encountered the COVID-19 contamination
theory argument under analogous insurance coverage policy provisions that we
reserved in Rose’s 1 and that appellants put forth here. Appellants point us to a
number of state court decisions finding that claims of “physical loss or damage”
from the COVID-19 virus itself similar to those made in their complaint were
sufficient at the pleading stage. 3
However, the cases upon which appellants chiefly rely–namely, Huntington
Ingalls Indus., Inc. v. Ace Am. Ins. Co., 287 A.3d 515, 533-34 (Vt. 2022), and Marina
Pac. Hotel & Suites, LLC v. Fireman’s Fund Ins. Co., 81 Cal. App. 5th 96, 109 (Cal.
Ct. App. 2022)–apply “extremely liberal pleading standards,” Huntington Ingalls,
287 A.3d at 536. The Huntington Ingalls court’s pleading standard requires
plaintiffs only to give defendants notice of the claims, id. at 533, and the Marina
Pacific court found that allegations were sufficient “however improbable they may
be,” Marina Pac., 81 Cal. App. 5th at 105 (internal quotation marks omitted). The
3 See, e.g., Huntington Ingalls Indus., Inc. v. Ace Am. Ins. Co., 287 A.3d 515, 533–34 (Vt. 2022) (reversing a judgment on the pleadings because adherence of COVID-19 virus to surfaces was an “alteration” that caused plaintiff’s loss); Marina Pac. Hotel & Suites, LLC v. Fireman’s Fund Ins. Co., 81 Cal. App. 5th 96, 109 (Cal. Ct. App. 2022) (reversing demurrer to complaint because allegation that the COVID- 19 virus caused a physiochemical reaction transforming property, “even if improbable,” is “unquestionably” sufficient at the pleading stage); San Jose Sharks LLC, v. Factory Mut. Ins. Co., 98 Cal. App. 5th 158, 168 (Cal. Ct. App. 2023) (reversing grant of a motion to strike pleadings that the virus itself caused physical damage because plaintiffs’ allegations of droplets contaminating surfaces “pass[es] muster.”) 11
standards that both courts applied lack the plausibility requirement that characterizes
our pleading standard. We require that pleadings “be enough to raise a right to relief
above the speculative level.” Chamberlain v. Amer. Honda Fin. Corp., 931 A.2d
1018, 1023 (D.C. 2007) (internal quotation marks omitted). “Bare allegations of
wrongdoing that are no more than conclusions ‘are not entitled to the assumption of
truth’ and are insufficient to sustain a complaint.” Logan v. LaSalle Bank Nat. Ass’n,
80 A.3d 1014, 1019 (D.C. 2013) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 679
(2009)).
Additionally, the cases where courts have accepted contamination theory
arguments for the COVID-19 virus are far outweighed by those where courts have
rejected them with alleged facts similar to those at issue here under our plausibility
standard at the motion-to-dismiss stage, see, e.g., George Washington Univ. v.
Factory Mut. Ins. Co., 626 F. Supp. 3d 8, 14 (D.D.C. 2022) (“the overwhelming
majority of courts that have considered the question have held that COVID-19 does
not materially alter the property it touches”), or the summary-judgment stage, see,
e.g., Schleicher & Stebbins Hotels, LLC v. Starr Surplus Lines Ins. Co., 302 A.3d
67, 77 (N.H. 2023) (“the presence of SARS-CoV-2 in the air at the property is not
relevant to the question of whether there has been ‘physical loss of or damage to
property,’ because the policies insure property, not people”). 12
Appellants also argue that the efforts they expended to replace or repair
property items further support their claim that the virus caused a physical alteration
to their premises. Drawing on the Policy’s definition of “interruption of business”
as ending when “covered property should be repaired, rebuilt, or replaced,”
appellants allege that they were “prevented from operating by . . . the need to repair,
remediate or replace property so damaged or lost.” But appellants do not provide
details in an otherwise thorough complaint on any such repairs beyond needing to
“mitigate the threat or actual physical presence of the virus on door-handles, tables,
silverware, surfaces, [and] in heating and air conditioning systems[.]” Nor do they
offer any alleged facts about the specific damage done by the virus to their property;
their complaint focuses instead on the dangers to people coming into contact with
that property. Taking them as true, we find that the complaints’ allegations of
damage here, which present almost no particulars beyond conclusory statements that
physical alteration occurred, do not state a plausible claim for “direct physical loss
of or damage” to covered property under our pleading standards for surviving a
motion to dismiss. 4 Chamberlain, 931 A.2d at 1023.
4 We note that appellants also argue that the absence of a virus exclusion in the Policy, an exclusion that was present in other Erie policies, suggests that the COVID-19 virus falls within the Policy’s coverage scope. We found in Rose’s 1, however, that “[a]lthough the Policy here does not include a specific virus or pandemic exclusion, no other clause extends coverage to loss of use absent a physical impediment to the property.” Rose’s 1, 290 A.3d at 63. Because we decline to hold that appellants’ contamination theory arguments, based on their pleadings, 13
B. Noxious Substances
We are also not persuaded by appellants’ argument that the COVID-19 virus
damages property in the same way that noxious substances do, which some courts
have held caused the type of damage entitling policyholders to coverage. Appellants
cite to cases from other jurisdictions where courts have held that noxious substances
like odors or gases have caused a physical loss or damage to covered property.
Appellants maintain that their COVID-19 contamination argument is a natural
extension of longstanding precedent. See, e.g., Gregory Packaging, Inc. v. Travelers
Prop. Cas. Co. of Am., 2014 WL 6675934, at *6 (D.N.J. Nov. 25, 2014) (ammonia
gas); W. Fire Ins. Co. v. First Presbyterian Church, 437 P.2d 52, 55 (Colo. 1968)
(en banc) (gasoline vapor); Port Auth. of N.Y. & N.J. v. Affiliated FM Ins. Co., 311
F.3d 226, 236 (3d Cir. 2002) (asbestos); Or. Shakespeare Festival Assoc. v. Great
Amer. Ins. Co., 2016 WL 3267247, at *5 (D. Or. June 7, 2016) (wildfire smoke),
vacated by stipulation.
In particular, appellants emphasize courts’ reasoning that such non-tangible
threats still have “physical properties [that] cannot reasonably be disputed.” Or.
Shakespeare, 2016 WL 3267247, at *5. Like the COVID-19 virus, appellants
contend, which threatens the people that touch infected surfaces or breathe infected
establish a physical impediment to their property, we similarly find that the absence of a virus exclusion does not entitle appellants to coverage under the Policy. 14
air, noxious substances have been found to damage property when they make
“further” use of that property “highly dangerous.” W. Fire. Ins. Co., 437 P.2d at
55-56.
But the behavior of the COVID-19 virus, as alleged in appellants’ complaint,
is distinct from that of the noxious substances in the cases they cite. Most noxious
substances have a more permanent physical presence: wildfire smoke leaves tangible
parts of ash and soot on surfaces or in HVAC systems, Or. Shakespeare, 2016 WL
3267247 at *1, ammonia gas requires dry ice to neutralize its effects, Gregory
Packaging, 2014 WL 6675934 at *1, and gasoline vapor “seep[s]” into building
walls, W. Fire. Ins. Co., 437 P.2d at 39. The COVID-19 virus, on the other hand, is
no longer viable on most surfaces after approximately seven days, 5 meaning, barring
any reintroduction, it would disappear after that time. In other words, the COVID-
19 virus is unlike other noxious substances because it is ultimately self-remediating,
rather than relying on an external force to remove it.
Appellants contend, and the Medical Society of the District of Columbia
reiterates in its amicus brief, that the trial court improperly reasoned that the
COVID-19 virus could be removed through cleaning, because it can be impervious
5 In an amicus brief, The Medical Society of the District of Columbia cites scientific studies demonstrating that the COVID-19 virus can survive up to twenty- eight days at room temperature on certain surfaces. The longer viability period suggested by these studies, however, does not change the self-remediating nature of the COVID-19 virus that distinguishes the virus from other noxious substances. 15
to cleaning and would be consistently reintroduced. However, the fact that the
COVID-19 virus could be reintroduced by diners even after cleaning does not affect
the distinction between the virus’s characteristics as a self-remediating substance
and the characteristics of other noxious substances. Appellants also argue that the
trial court was incorrect in finding that the Policy required damage to be more than
temporary. But it is not the inherently temporary nature of the COVID-19 virus’s
presence on substances that precludes appellants from coverage; rather, it is the
virus’s self-remediation, which suggests that it does not cause physical harm to
property as other noxious substances might.
Moreover, appellants’ attempts to characterize the COVID-19 virus as a
noxious substance entitling them to insurance coverage is further belied by a reliance
on reasoning that would contradict our own precedent. The noxious substance cases
appellants cite reason that a “loss of use” could be a physical damage or loss to
insurance-covered property. Or. Shakespeare, 2016 WL 3267247, at *5 (rejecting
the argument that a physical loss or damage must be “structural”); W. Fire Ins. Co.,
165 Colo. at 38 (“loss of use” that is “viewed in proper context” can establish a
physical loss or damage); Gregory Packaging, 2014 WL 6675934, at *5 (rejecting
an interpretation of “physical loss or damage” as requiring a physical alteration).
We have, however, rejected the conclusion that a “loss of use” can satisfy the
language of the Policy requiring a “physical loss of or damage”; instead, we have 16
held that the language of the Policy requires policyholders to establish a “tangible,
material alteration or change to covered property.” Rose’s 1, 290 A.3d at 59.
C. Civil Authority Coverage Claim
Appellants also appeal the trial court’s dismissal of their claim for coverage
under the Policy’s Civil Authority provision, contending that their pleadings satisfy
the requirements laid out in the Policy’s Civil Authority provision text. However,
the language of the Civil Authority provision—“a peril insured against” (emphasis
added)—makes clear that such coverage extends only to those policyholders that
successfully establish a direct physical loss of or damage to covered property.
Without “direct physical loss or damage” to covered property, there is no trigger for
the Civil Authority provision’s coverage, which is “premised on the occurrence of a
‘peril insured against.’” Sanzo Enters., LLC v. Erie Ins. Exch., 182 N.E.3d 393, 401
(Ohio Ct. App. 2021) (discussing the same Erie policy). Because appellants do not
establish a direct physical loss or damage, they are not entitled to coverage under the
Policy’s Civil Authority provision and no further analysis is required.
Conclusion
We have great sympathy for the losses suffered by appellants during the
sudden and extraordinary global COVID-19 pandemic. But under the terms of the 17
Policy, we conclude that the COVID-19 virus did not cause a tangible change or
alteration to the appellants’ property, required under the Policy to establish a “direct
physical loss of or damage” entitling them to insurance coverage. Further,
appellants’ complaint did not allege sufficient factual allegations to “raise a right to
relief above the speculative level.” Pietrangelo, 68 A.3d at 709. Thus, we affirm
the trial court’s grant of Erie’s motion to dismiss.
So ordered.