Menominee Indian Tribe of Wisconsin v. Lexington Insurance Company

• Court: District Court, N.D. California
• Decided: August 23, 2021
• Docket: 3:21-cv-00231
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 MENOMINEE INDIAN TRIBE OF Case No. 21-cv-00231-WHO WISCONSIN, et al., 8 Plaintiffs, ORDER GRANTING MOTIONS TO 9 DISMISS v. RE: DKT. NOS. 62, 64, 67, 68, 69, 70, 73, 10 106 LEXINGTON INSURANCE COMPANY, 11 et al., Defendants. 12 13 Plaintiffs Menominee Indian Tribe of Wisconsin, the Menominee Indian Gaming 14 Authority d/b/a Menominee Casino Resort (“MCR”), and the Wolf River Development 15 Company’s (collectively, “Menominee”) seek coverage from each defendant for the damages 16 Menominee sustained due to the COVID-19 pandemic and resulting government closure orders. 17 Defendant Lexington Insurance Company (“Lexington”), joined by the other insurance company 18 defendants (collectively “Defendants”), moves to dismiss Menominee’s First Amended Complaint 19 (“FAC”) because Menominee cannot plausibly allege that it is entitled to coverage. For the 20 reasons explained below, all of Defendants’ motions related to Lexington’s motion to dismiss 21 Menominee’s FAC are GRANTED with prejudice.1 22 BACKGROUND 23 I. FACTUAL BACKGROUND 24 Menominee operates a variety of businesses located in Keshena, Wisconsin, including the 25

26 1 Separate from Lexington’s motion, defendants Arch Specialty Insurance Company (“Arch”), Liberty Mutual Fire Insurance Company (“Liberty”), and Landmark American Insurance 27 Company (“Landmark”) also moved to dismiss the FAC under various exclusionary provisions in 1 Thunderbird Complex—a mini casino, restaurant, bar, and outdoor entertainment venue—and the 2 Menominee Tribal Clinic, a multi-service healthcare center. Dkt. No. 58 (“FAC”) ¶¶ 5–8. These 3 properties are among those insured under the Tribal Property Insurance Program (“TPIP”), a 4 nationwide insurance program in which various insurers participate. Id. ¶¶ 29, 46–50. The TPIP 5 involves separate layers of coverage that implicate different insurers. Id. ¶¶ 10–11. For the 6 policy period from July 1, 2019, through July 1, 2020, each of these policies incorporates a master 7 policy form, referred to as the Tribal First Policy Wording, TPIP USA Form No. 15 (the 8 “Policy”), which sets forth the terms, conditions, and exclusions of coverage applicable to 9 Menominee. Id. ¶ 46. The Policy insures against “covered perils,” which are defined as “all risk 10 of direct physical loss or damage,” subject to the Policy’s “terms, conditions and exclusions.” 11 Policy at 24. The Policy was a part of the TPIP’s “Property Solutions” and includes coverage 12 under the Business Interruption, Extra Expense, Ingress/Egress, Civil Authority, Contingent Time 13 Element, Tax Revenue Interruption, and Protection and Preservation of Property provisions. FAC 14 ¶¶ 11–12, 60–61. 15 In March 2020, the State of Wisconsin and the Menominee Tribe issued public health 16 orders (the “Closure Orders”) due to the “threat and presence of COVID-19.” Id. ¶¶ 101–34. The 17 orders required the “whole or partial suspension of business at a wide range of establishments” 18 from March 2020 through March 2021. Id. The Wisconsin orders “exempted tribal members 19 acting within their own reservation” but the Menominee Tribal Legislature adopted Wisconsin’s 20 guidelines, subject to “the sovereignty of the Tribe.” Id. ¶¶ 109, 120. 21 Menominee asserts that it suffered “direct physical loss or damage” to its property from 22 “the presence of COVID-19.” Id. ¶¶ 13, 66, 138; see also id. ¶¶ 78–100. According to 23 Menominee, “it is statistically certain that the virus has been present for some period of time since 24 the COVID-19 outbreak began and that the virus continues to pose an actual imminent threat to 25 Plaintiffs.” Id. ¶ 148. Menominee claimed that “[a]t least 42 employees [] tested positive in 26 2020” and “during the period of the Policy, individuals with COVID-19 or otherwise carrying the 27 coronavirus entered Plaintiffs’ properties, including MCR, Thunderbird, and the Tribal Clinic.” 1 “the presence of COVID-19” and various “Closure Orders.” Id. ¶¶ 13, 20, 151. The “presence of 2 the coronavirus” and “the damage caused to Menominee’s physical property” rendered its 3 properties “uninhabitable.” Id. ¶¶ 13, 15–16. 4 II. PROCEDURAL BACKGROUND 5 Menominee submitted an insurance claim for its alleged losses under the Policy, and the 6 claim was denied. Id. ¶ 152. In November 2020, Menominee brought this class action in 7 California state court against its insurers, seeking a declaration of coverage for the claimed 8 damages Menominee sustained due to the COVID-19 pandemic and resulting Closure Orders. 9 Dkt. No. 1-2. Lexington removed the action to federal court and on February 11, 2021, moved to 10 dismiss the complaint, arguing, among other things, that Menominee had pleaded only the 11 temporary loss of use of property. Dkt. No. 17. The other Defendants joined Lexington’s motion. 12 Dkt. Nos. 18, 20–23, 25–26, 28. On March 12, 2021, Menominee voluntarily amended its 13 complaint and added various allegations regarding the presence of COVID-19 and the property 14 damage the virus allegedly caused. Dkt. No. 58. 15 Menominee seeks relief under seven provisions of the Policy: Business Interruption, Extra 16 Expense, Ingress/Egress, Interruption by Civil Authority, Contingent Time Element, Tax Revenue 17 Interruption, and Protection and Preservation of Property. FAC ¶¶ 163–270. As to each identified 18 provision, Menominee asserts causes of action for breach of contract and declaratory judgment. 19 Id. On April 9, 2021, Lexington filed the present motion to dismiss Menominee’s FAC. Dkt. No. 20 62 (“Mot.”). Subsequently, the other Defendants joined Lexington’s motion to dismiss.2 Three 21

22 2 The other defendants are the following: Underwriters at Lloyd’s – Syndicates: ASC 1414, TAL 1183, MSP 318, ATL 1861, KLN 510, AGR 3268; Underwriter’s at Lloyd’s – Syndicate: CNP 23 4444; Underwriters at Lloyd’s – Syndicates: KLN 0510, ATL 1861, ASC 1414, QBE 1886, MSP 0318, APL 1969, CHN 2015; Underwriters at Lloyd’s – Syndicate: BRT 2987; Underwriters at 24 Lloyd’s – Syndicates: KLN 0510, TMK 1880, BRT 2987, BRT 2988, CNP 4444, ATL 1861, Neon Worldwide Property Consortium, AUW 0609, TAL 1183, AUL 1274; Homeland Insurance 25 Company of New York; Endurance Worldwide Insurance Ltd T/AS Sompo International; and XL Catlin Insurance Company UK Ltd (Dkt. No. 63); Hallmark Specialty Insurance Company and 26 Aspen Specialty Insurance Company i/s/h/a Underwriters at Lloyd’s – Aspen Specialty Insurance Company (Dkt. No. 64); Evanston Insurance Company (Dkt. No. 65); Allied World National 27 Assurance Company (Dkt. No. 67); Liberty Mutual Fire Insurance Company (Dkt. No. 68); 1 defendants, Arch, Liberty, and Landmark joined Lexington’s motion and filed their own motions 2 to dismiss Menominee’s FAC under different theories. See Dkt. Nos. 68–70. 3 III. POLICY PROVISIONS 4 Under the Policy’s section for “Business Interruption, Extra Expense & Rental Income,” 5 the provision provides, in relevant part:

6 Subject to the terms, conditions and exclusions stated elsewhere herein, this Policy provides coverage for: 7 . . .

8 BUSINESS INTERRUPTION Against loss resulting directly from interruption of business, services 9 or rental value caused by direct physical loss or damage, as covered by this Policy to real and/or personal property insured by this Policy, 10 occurring during the term of this Policy. . . . 11 Dkt. No. 58-1 (“Policy”) at 19. 12 The Policy extends coverage to “Extra Expense,” which provides in relevant part: 13 EXTRA EXPENSE This Policy is extended to cover the necessary and reasonable extra 14 expenses occurring during the term of this Policy at any location as hereinafter defined, incurred by the Named Insured in order to 15 continue as nearly as practicable the normal operation of the Named Insured’s business following damage to or destruction of covered 16 property by a covered peril which is on premises owned, leased or occupied by the Named Insured . . . . 17 Id. Both the Business Interruption and Extra Expense loss is paid “during the period of 18 restoration,” id., which is defined as follows: 19 PERIOD OF RESTORATION 20 The period during which business interruption and or rental interruption applies will begin on the date direct physical loss occurs 21 and interrupts normal business operations and ends on the date that the damaged property should have been repaired, rebuilt 22 or replaced with due diligence and dispatch, but not limited by the expiration of this policy. 23 Id. at 23. 24 The section for “Business Interruption, Extra Expense & Rental Income,” also includes 25 coverage to “Ingress/Egress” and “Interruption by Civil Authority,” which states in relevant part: 26 INGRESS /EGRESS 27 This Policy is extended to insure the actual loss sustained during the Policy and occurring at property located within a 10 mile radius of 1 covered property, ingress to or egress from the covered property covered by this Policy is prevented. Coverage under this extension is 2 subject to a 24-hour waiting period.

3 INTERRUPTION BY CIVIL AUTHORITY This Policy is extended to include the actual loss sustained by the 4 Named Insured, as covered hereunder during the length of time, not exceeding 30 days, when as a direct result of damage to or destruction 5 of property by a covered peril(s) occurring at a property located within a 10 mile radius of the covered property, access to the covered 6 property is specifically prohibited by order of a civil authority. Coverage under this extension is subject to a 24-hour waiting period. 7 Id. at 20. 8 Under the same section for “Business Interruption, Extra Expense & Rental Income,” 9 coverage to “Contingent Time Element” and “Tax Revenue Interruption” states in relevant part: 10 CONTINGENT TIME ELEMENT COVERAGE 11 Business interruption, rental income, and extra expense coverage provided by this Policy is extended to cover loss directly resulting 12 from physical damage to property of the type not otherwise excluded by this Policy at direct supplier or direct customer 13 locations that prevents a supplier of goods and/or services to the Named Insured from supplying such goods and/or services, or that 14 prevents a recipient of goods and/or services from the Named Insured from accepting such goods and/or services. . . . 15 Id. at 20. 16 TAX REVENUE INTERRUPTION 17 Except as hereinafter or heretofore excluded, this Policy insures against loss resulting directly from necessary interruption of sales, 18 property or other tax revenue including, but not limited to Tribal Incremental Municipal Services Payments collected by or due 19 the Named Insured caused by damage, or destruction by a peril not excluded from this Policy to property which is not operated by the 20 Named Insured and which wholly or partially prevents the generation of revenue for the account of the Named Insured. . . . 21 Id. at 21. Like Business Interruption and Extra Expense coverage, Tax Revenue Interruption 22 coverage is further limited to “only the length of time as would be required with exercise of due 23 diligence and dispatch to rebuild, replace or repair the contributing property.” Id. 24 Under the Policy’s section for “Property Damage,” which is separate from the section for 25 Business Interruption coverage and its extensions, the Policy provides coverage for “Protection 26 and Preservation of Property.” Id. at 13. The Policy states, in relevant part: 27 PROTECTION AND PRESERVATION OF PROPERTY 1 . . . In case of actual or imminent physical loss or damage of the type 2 insured against by this Policy, the expenses incurred by the Named Insured in taking reasonable and necessary actions for the temporary 3 protection and preservation of property insured hereunder shall be added to the total physical loss or damage otherwise recoverable 4 under the Policy . . . . Id. 5 LEGAL STANDARD 6 Under Federal Rule of Civil Procedure 12(b)(6), a district court must dismiss a complaint 7 if it fails to state a claim upon which relief can be granted. To survive a Rule 12(b)(6) motion to 8 dismiss, the plaintiff must allege “enough facts to state a claim to relief that is plausible on its 9 face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is facially plausible when 10 the plaintiff pleads facts that “allow the court to draw the reasonable inference that the defendant 11 is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation 12 omitted). This standard is not akin to a probability requirement, but there must be “more than a 13 sheer possibility that a defendant has acted unlawfully.” Id. While courts do not require 14 “heightened fact pleading of specifics,” a plaintiff must allege facts sufficient to “raise a right to 15 relief above the speculative level.” Twombly, 550 U.S. at 555, 570. 16 In deciding whether the plaintiff has stated a claim upon which relief can be granted, the 17 court accepts the plaintiff’s allegations as true and draws all reasonable inferences in favor of the 18 plaintiff. Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir. 1987). But the court is not 19 required to accept as true “allegations that are merely conclusory, unwarranted deductions of fact, 20 or unreasonable inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008). 21 If the court dismisses the complaint, it “should grant leave to amend even if no request to 22 amend the pleading was made, unless it determines that the pleading could not possibly be cured 23 by the allegation of other facts.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000). In making 24 this determination, the court should consider factors such as “the presence or absence of undue 25 delay, bad faith, dilatory motive, repeated failure to cure deficiencies by previous amendments, 26 undue prejudice to the opposing party and futility of the proposed amendment.” Moore v. Kayport 27 Package Express, 885 F.2d 531, 538 (9th Cir. 1989). 1 DISCUSSION I. CHOICE OF LAW 2 As a preliminary matter, the parties dispute whether California or Wisconsin law applies to 3 the Policy. The parties do not dispute the choice-of-law principle for determining the substantive 4 law—both parties agree that as “a federal court exercising diversity jurisdiction,” I apply 5 “California’s choice-of-law principles to determine the body of substantive law that applies to the 6 interpretation” of the Policy. See Welles v. Turner Ent. Co., 503 F.3d 728, 738 (9th Cir. 2007). 7 Under California’s choice-of-law principles, CAL. CIV. CODE § 1646 governs only the 8 interpretation of contractual terms and the governmental interest analysis governs all other issues 9 in a contract dispute. See Glob. Commodities Trading Grp., Inc. v. Beneficio de Arroz Choloma, 10 S.A., 972 F.3d 1101, 1111 (9th Cir. 2020). Section 1646 states, “[a] contract is to be interpreted 11 according to the law and usage of the place where it is to be performed; or, if it does not indicate a 12 place of performance, according to the law and usage of the place where it is made.” CAL. CIV. 13 CODE § 1646. “A contract ‘indicate[s] a place of performance’ within the meaning of section 1646 14 if the contract expressly specifies a place of performance or if the intended place of performance 15 can be gleaned from the nature of the contract and its surrounding circumstances.” Frontier Oil 16 Corp. v. RLI Ins. Co., 153 Cal. App. 4th 1436, 1459 (2007). 17 Menominee contends that California law governs because the class action “implicates 18 dozens of places of performance across the nation” and so under Section 1646, the “only unifying 19 contractual ‘place of performance’ common to the class members is California, where Tribal First 20 brokered the policies.” Dkt. No. 72 (“Opp.”) at 8–9. It also relies on the governmental interest 21 analysis, but because this dispute only concerns contract interpretation, only Section 1646 is 22 applicable. See Glob. Commodities Trading Grp., 972 F.3d at 1111. 23 Defendants assert that no class has yet been certified and therefore only the allegations that 24 Menominee pleaded as to itself are relevant. See Lierboe v. State Farm Mut. Auto. Ins. Co., 350 25 F.3d 1018, 1022 (9th Cir. 2003) (holding that “if none of the named plaintiffs purporting to 26 represent a class establishes the requisite of a case or controversy with the defendants, none may 27 seek relief on behalf of himself or any other member of the class.”). I agree with Defendants and 1 conclude that the Policy indicates that the place of performance is Wisconsin. See CAL. CIV. CODE 2 § 1646. Menominee and its insured properties are located in Wisconsin. FAC ¶¶ 26–28; Dkt. No. 3 58-1 (“FAC, Ex. 1”) at 3. Accordingly, Wisconsin law applies to this dispute. 4 In Wisconsin, the interpretation of an insurance policy is a question of law. Casey v. 5 Smith, 353 Wis. 2d 354, 365 (2014). Wisconsin courts have a “well-established methodology for 6 determining insurance coverage,” where a court first looks to the policy’s initial grant of coverage. 7 Id. “Second, if there is an initial grant of coverage, the court will examine whether any exclusions 8 withdraw coverage from a claim. Third, if an exclusion applies, the court will then consider 9 whether there are any exceptions to the exclusion that reinstate coverage.” Id. (citations omitted). 10 Under Wisconsin law, courts interpret insurance policy language according to its “plain and 11 ordinary meaning, as understood by a reasonable person in the position of the insured.” Id. 12 “Ambiguities are construed against the insurer” and “policies should be construed to avoid absurd 13 or unreasonable results.” Id. 14 II. THE MEANING OF “DIRECT PHYSICAL LOSS OR DAMAGE” UNDER WISCONSIN LAW 15 The threshold question is what constitutes “direct physical loss or damage” under 16 Wisconsin law. Because the terms are undefined in the Policy, I must look to their common and 17 ordinary meaning. See Casey, 353 Wis. 2d at 365. Defendants argue that the plain and ordinary 18 meaning of “direct physical loss or damage” requires tangible, not intangible change to the 19 physical characteristics of the property. Mot. at 8–9. But Defendants conflate the term “direct 20 physical loss” with “direct physical damage.” 21 Under Wisconsin law, the Seventh Circuit concluded that the term “direct” is meant to 22 “exclude situations in which an intervening force plays some role in the damage” and the term 23 “physical damage” “generally refers to tangible as opposed to intangible damage.” See Windridge 24 of Naperville Condo. Ass’n v. Phila. Indem. Ins. Co., 932 F.3d 1035, 1040 (7th Cir. 2019); see 25 also Advance Cable Co., LLC v. Cincinnati Insurance Co., 788 F.3d 743, 746 (7th Cir. 2015) 26 (concluding that hail denting a roof constituted “direct physical loss” where “loss” was defined as 27 “accidental loss or damage” in the policy). These Seventh Circuit cases do not explain the 1 distinction between “physical loss” and “physical damage” because in both Windridge and 2 Advance Cable, the term “loss” in “direct physical loss” was defined in the policy as “accidental 3 loss or damage.” See Windridge, 932 F.3d at 1039; Advance Cable, 788 F.3d at 747. Although 4 the Seventh Circuit has concluded that “physical damage” under Wisconsin law “generally refers 5 to tangible as opposed to intangible damage” such as an “alteration in appearance,” Windridge, 6 932 F.3d at 1040 n.4, it has not determined the meaning of “physical loss.” 7 The Wisconsin Supreme Court and court of appeals have briefly addressed the plain and 8 ordinary meaning of “direct physical loss” in insurance policies. In RTE Corp. v. Maryland Cas. 9 Co., 74 Wis. 2d 614, 624 (1976), the Wisconsin Supreme Court found that the “dictionary 10 definition of the word loss is ‘the state or fact of being destroyed or placed beyond recovery.” A 11 Wisconsin court of appeals relied on RTE Corp. to hold that, “The common and ordinary meaning 12 of the word ‘physical’ is ‘of or related to natural or material things as opposed to things mental, 13 moral, spiritual, or imaginary,’ while the common and ordinary meaning of the word ‘loss’ is ‘the 14 state or fact of being destroyed or placed beyond recovery.’” 3303-05 Marina Rd., LLC v. W. 15 Bend Mut. Ins. Co., 791 N.W.2d 404 at *4 (Wis. Ct. App. Sept. 8, 2010) (citations omitted) 16 (holding that, “by including the word ‘physical’ before ‘loss of … Covered Property’ the parties 17 intended that the Policies cover material or tangible destruction of the Property, not financial 18 detriment resulting from a hasty investment.”). 19 With that background, the question becomes how courts have interpreted “direct physical 20 loss” in the context of COVID-19 insurance cases. In the past year there have been a handful of 21 COVID-19 insurance cases discussing the meaning of “direct physical loss” under Wisconsin law. 22 They are not consistent. These cases range from holding that “direct physical loss” requires physical 23 damage to it does not require physical damage and that even “loss of use” alone can constitute 24 “direct physical loss.” 25 On one end of the spectrum is the most recent opinion on this issue, a Wisconsin district 26 court decision, which found that “direct physical loss” does not encompass “loss of use” due to 27 pandemic-related closure orders. See Biltrite Furniture, Inc. v. Ohio Sec. Ins. Co., 2021 WL 1 3056191, at *4 (E.D. Wis. July 20, 2021).3 Instead, the court held that “direct physical loss” 2 “unambiguously requires some form of actual, physical damage to the insured premises to trigger 3 coverage,” based on its “common and ordinary meaning.” Id. To reach this conclusion, the court 4 relied on cases that applied Illinois or New York law, not Wisconsin law. See id. 5 The court referenced only one case that applied Wisconsin law, Wisconsin Label Corp. v. 6 Northbrook Prop. & Cas. Ins. Co., 607 N.W.2d 276, 284 (Wis. 2000), to hold that the plaintiff’s 7 “argument that its loss of use and functionality are ‘physical losses’ . . . is unsupported by Wisconsin 8 law.” Id. at *5. But the Wisconsin Label court did not discuss the meaning of “direct physical loss.” 9 Rather, the court discussed how there was no physical damage to items that were accidentally 10 mislabeled. Wis. Label Corp., 607 N.W.2d at 331–32. The Biltrite court relied on Wisconsin Label

11 to find that there was no “physical damage to the store or items therein by virtue of the COVID-19 12 pandemic or the attendant closure orders.” Biltrite, 2021 WL 3056191, at *5. It concluded that it 13 would follow in the footsteps of “many courts” and hold that “a complaint which only alleges loss 14 of use of the insured property fails to satisfy the requirement for physical damage or loss.” Id. 15 According to the Biltrite court, “‘direct physical loss’ encompasses theft, misplacement, or total 16 destruction of property, while ‘damage’ addresses specifically harmed components, or other ‘lesser’ 17 injuries.”4 Id. at *4. 18 At the center of the spectrum is a Wisconsin state court case, which concluded that “direct 19 physical loss” does not require physical damage and although “loss of use” alone is not enough, 20 loss of use due to a physical event can constitute “direct physical loss.” See Dkt. No. 62-1 (Al 21 Johnson’s Swedish Rest. & Butik, Inc. v. Society Ins. Mut. Co., No. 20-CV-52, Hr’g Tr. (Wis. Cir. 22 Ct. Dec. 4, 2020)). In Al Johnson’s, the plaintiffs had sought insurance coverage after government 23 orders shut down its businesses. Id. Unlike Menominee, they did not allege that COVID-19 was 24 present on the premises. The Al Johnson’s court turned to Wisconsin precedent to determine what 25 3 On August 20, 2021, Defendants filed a motion to submit the Biltrite case as additional authority. 26 Dkt. No. 108. I was aware of and analyzed the case before the motion was filed. The motion is GRANTED. 27 1 “physical loss” meant in the context of COVID-19. Id. at 4–5; see e.g., Manpower Inc. v. Ins. Co. 2 of the State of Pennsylvania, 2009 WL 3738099, at *1 (E.D. Wis. Nov. 3, 2009) (concluding that 3 “direct physical loss” did not require that the property be physically damaged); Wis. Label Corp. 4 v. Northbrook Prop. & Cas. Ins. Co., 233 Wis. 2d 314, 331–32 (2000) (equating “common and 5 ordinary meaning” of “physical injury” with “physical damage” and finding “[n]o physical 6 damage” where a product was only mislabeled); 3303-05 Marina Rd., LLC v. W. Bend Mut. Ins. 7 Co., 2010 WL 3489391, at *4 (Wis. Ct. App. Sept. 8, 2010) (“the common and ordinary meaning 8 of the word ‘loss’ is ‘the state or fact of being destroyed or placed beyond recovery.’”). 9 The court concluded that “physical loss” does not “require[] a structural alteration,” it does 10 not “have to be permanent,” and it does not require “physical damage to property.” Id. at 4–5. 11 But “physical loss” does require some sort of physical event causing the loss. Id. at 5–7. To reach 12 this conclusion, the court relied on Manpower, a Wisconsin district court case where a tenant had 13 sought coverage for its property when portions of its building collapsed even though the tenant’s 14 office space had not been affected. Manpower, 2009 WL 3738099, at *1. The Manpower court 15 reviewed the policy language, which covered all risk of “direct physical loss of or damage to” the 16 insured property and found that “‘direct physical loss’ must mean something other than ‘direct 17 physical damage.’” Id. at *5. Otherwise, “if ‘direct physical loss’ required physical damage, the 18 policy would not cover theft, since once can steal property without physically damaging it.” Id. 19 As a result, the court rejected the insurer’s argument that “a peril must physically damage property 20 in order to cause a covered loss” and found that because a physical event—the collapse—created a 21 physical barrier between the insured and its property, the loss was “physical” even though the 22 insured’s own property remained unchanged. Id. at *5–*6. 23 Under this framework, the Al Johnson’s court concluded that there was no “physical loss” 24 because plaintiffs had only alleged dispossession from government orders; unlike in Manpower, 25 there was no “physical event” that had caused the loss. Al Johnson’s, Hr’g Tr. at 7–8. Although 26 Al Johnson’s acknowledged that dispossession was part of the loss, that did not mean it was a 27 “physical loss, or a loss occasioned by a direct physical loss.” Id. The court distinguished two 1 Johnson’s plaintiffs had not alleged that COVID-19 was actually present on its premises. Id. at 9, 2 11–12 (distinguishing Blue Springs Dental Care, LLC v. Owners Ins. Co., 488 F.Supp.3d 3 867(W.D. Mo. Sept. 21, 2020) and Studio 417, Inc. v. Cincinnati Ins. Co., 478 F. Supp. 3d 794 4 (W.D. Mo. Aug. 12, 2020)). The court commented that it would not make an advisory ruling on 5 whether the plaintiffs could have alleged “physical loss” had the plaintiffs alleged that COVID-19 6 was present on the premises. Id. at 10, 12. 7 In another Wisconsin state court case where the plaintiffs did allege that the presence of 8 COVID-19 on their premises created the physical loss, the court did not directly address whether 9 COVID-19 can constitute “physical loss.” Dkt. No. 72-3 (Colectivo Coffee Roasters, Inc. v. 10 Society Ins., No. 20-CV-002597 (Wis. Cir. Ct. Jan. 29, 2021)). Instead, the court found that the 11 term “direct physical loss” was ambiguous because it was not so “clear that direct physical loss 12 actually requires damage to the covered property” and therefore construed the term against the 13 insurer and denied the insurer’s motions to dismiss. Id. at 38 (commenting that “direct physical 14 loss must be something other than damage or the use of the word damage in that policy language 15 would be surplus language, and one does not construe contract language so as to allow any of the 16 material language to be surplus language.”). 17 Finally, on the other end of the spectrum is a multi-district litigation involving a case under 18 Wisconsin law, where an Illinois district court denied a motion for summary judgment and held that 19 plaintiffs could plead “loss of use” alone and “did not need to “show a change to the property's 20 physical characteristics” to plead “direct physical loss.” In re Soc'y Ins. Co. COVID-19 Bus. 21 Interruption Prot. Ins. Litig., 2021 WL 679109, at *8–*9 (N.D. Ill. Feb. 22, 2021), motion to certify 22 appeal denied, 2021 WL 2433666 (N.D. Ill. June 15, 2021). Plaintiffs from Wisconsin, Minnesota, 23 and Tennessee had alleged that “the losses to their businesses occurred as a direct result of the actual 24 presence of the coronavirus itself on the premises” as well as government shut down orders. Id. 25 at *1. The court held that “the disjunctive ‘or’ in [direct physical loss or damage] means that 26 ‘physical loss’ must cover something different from ‘physical damage.’” Id. at *8. Without relying 27 on any Wisconsin case addressing the definition of “direct physical loss,” the court concluded that 1 pandemic-caused shutdown orders do impose a physical limit: the restaurants are limited from using 2 much of their physical space.” Id. at *9. To mitigate the inability of using all of the space, the 3 restaurant had to expand the physical space and therefore the loss was a tangible or “physical” loss 4 as opposed to an intangible one (e.g., government orders imposing a financial limit by capping the 5 number of sales each restaurant could make). Id. 6 In re Society is an outlier because it contradicts the other Wisconsin cases, which all held 7 that loss of use alone is not enough to constitute direct physical loss. See, e.g., Biltrite, 2021 WL 8 3056191, at *4–*5 (“direct physical loss” encompasses theft, misplacement, or total destruction of 9 property); RTE Corp., 74 Wis. 2d at 624 (“loss is ‘the state or fact of being destroyed or placed 10 beyond recovery.”). At the very least there needs to be a physical event that caused the loss of use. 11 See, e.g., Manpower, 2009 WL 3738099, at *5–*6 (“physical loss” can be loss of use caused by a

12 physical event); Al Johnson’s, Hr’g Tr. at 4–7 (same); Colectivo, No. 20-CV-002597 at 38 (relying 13 on Al Johnson’s to acknowledge that there was no physical event that created a physical barrier 14 between the insured and its property). It is not apparent that the In re Society court relied on any 15 Wisconsin law in holding that loss of use alone can constitute direct physical loss. Accordingly, I 16 will not consider In re Society’s definition of “direct physical loss.” 17 In sum, a majority of these Wisconsin cases concluded that “direct physical loss” does not 18 require physical damage and that loss of use caused by a physical event can constitute “direct 19 physical loss.”5 See, e.g., Manpower, 2009 WL 3738099, at *5–*6 (“physical loss” does not require

20 physical damage); Al Johnson’s, Hr’g Tr. at 4–7 (“physical loss” does not require a structural 21 alteration, permanency, or physical damage to property); Colectivo, No. 20-CV-002597 at 38. But 22 the most recent Wisconsin case reached the opposite conclusion and held that “direct physical loss” 23

24 5 Contrary to Defendants’ argument that Wisconsin law comports with California law, the 25 definition of “direct physical loss” can be different. Under California law, “direct physical loss” requires a “distinct, demonstrable, physical alteration of the property,” a “physical change in the 26 condition of the property,” or “permanent dispossession of something.” See MRI Healthcare Ctr. of Glendale, Inc. v. State Farm Gen. Ins. Co., 187 Cal. App. 4th 766, 771, 779–80 (2010) (internal 27 quotation marks and citations omitted); Mudpie, Inc. v. Travelers Cas. Ins. Co. of Am., 487 F. 1 requires physical damage. See Biltrite, 2021 WL 3056191, at *4–*5 (“physical loss” requires some 2 form of physical damage and encompasses theft, misplacement, or total destruction of property). 3 The Biltrite court did not, however, discuss whether “physical loss” can encompass loss of use 4 caused by a physical event. To avoid any confusion, I will address whether coverage applies in this 5 case under both frameworks. 6 III. WHETHER MENOMINEE CAN STATE A PLAUSIBLE CLAIM OF RELIEF UNDER THE POLICY’S COVERAGE PROVISIONS 7 A. Business Interruption and Extra Expense Coverage 8 The parties disagree whether Menominee can plausibly state a claim for relief under the 9 Business Interruption and Extra Expense provisions, which require allegations of “loss resulting 10 directly from interruption of business, services or rental value caused by direct physical loss or 11 damage” to the insured property that can be “repaired, built or replaced.” FAC, Ex. 1 at 19, 23. 12 Menominee contends that it is entitled to coverage because the presence of COVID-19 on its 13 properties interrupted its businesses. The parties dispute whether Menominee adequately pleaded 14 the presence of COVID-19 on its premises and whether the presence of COVID-19 can constitute 15 “direct physical loss or damage.” 16 1. Whether Menominee Plausibly Pleaded the Presence of COVID-19 on 17 Insured Property 18 Defendants assert that Menominee does not plausibly assert coverage under a policy 19 provision, in part because Menominee fails to plead that there was an actual exposure of 20 COVID-19 on its properties during the policy period. To argue that the FAC is sufficient, 21 Menominee relies on a Missouri decision, Studio 417, Inc. v. Cincinnati Ins. Co., 478 F. Supp. 3d 22 794, 797–98 (W.D. Mo. Aug. 12, 2020). The Studio 417 court held that the plaintiffs plausibly 23 alleged that they were entitled to coverage because the plaintiffs pleaded that “the presence of 24 COVID-19 and the Closure Orders caused a direct physical loss or direct physical damage to their 25 premises ‘by denying use of and damaging the covered property, and by causing a necessary 26 suspension of operations during a period of restoration.’” Id. at 798. The Studio 417 plaintiffs 27 alleged that COVID-19 was present on their insured properties because it “is a physical substance” 1 (quotation marks omitted). 2 Menominee argues that the FAC is sufficient because it pleaded similar facts as those 3 alleged in Studio 417. Opp. at 13–14. Specifically, Menominee alleged that the “prolonged 4 prevalence of COVID-19 in the areas encompassing Plaintiff’s property made it unavoidable that 5 individuals with COVID-19 or otherwise carrying the coronavirus, including employees, visitors, 6 patrons, and guests would be physically present at Plaintiff’s property on various dates since the 7 earliest days of the pandemic.” FAC ¶ 139. Menominee pleaded that “during the period of the 8 Policy, individuals with COVID-19 or otherwise carrying the coronavirus entered Plaintiffs’ 9 properties, including MCR, Thunderbird, and the Tribal Clinic.” Id. And in 2020, “hundreds of 10 cases of COVID-19 were reported on the Menominee reservation,” the number of cases in 11 September exceeded 120 cases, and “[a]t least 42 employees tested positive.” Id. 12 Defendants contend that Menominee’s claims fail to sufficiently allege that “an actual 13 exposure occurred at an insured property.” Dkt. No. 77 (“Reply”) at 4; see Water Sports Kauai, 14 Inc. v. Fireman's Fund Ins. Co., No. 20-CV-03750-WHO, 2021 WL 775397, at *1 (N.D. Cal. Feb. 15 1, 2021) (“Water Sports Kauai II”) (dismissing plaintiff’s claims because plaintiff failed to allege 16 that COVID-19 was present at a specific store that caused plaintiff some specific loss). A 17 likelihood that COVID-19 was present on the property is not enough to allege “presence of 18 COVID-19.” See, e.g., Water Sports Kauai II, 2021 WL 775397, at *1 (dismissing allegations 19 because “plaintiff pleaded only additional facts showing that the coronavirus was ‘likely’ in the 20 environment surrounding at least three specific [] stores.”) 21 Here, Menominee pleaded that COVID-19 was actually present on Menominee’s 22 businesses. Although the FAC does not plead that any of the 42 employees who allegedly tested 23 positive entered insured property while contagious, the FAC does allege that “during the period of 24 the Policy, individuals with COVID-19 or otherwise carrying the coronavirus entered Plaintiffs’ 25 properties, including MCR, Thunderbird, and the Tribal Clinic.” FAC ¶ 139. Accordingly, 26 Menominee plausibly alleged that there was an actual exposure of COVID-19 at its businesses. 27 2. Whether the Presence of COVID-19 on Insured Property Constitutes 1 “Direct Physical Loss or Damage” 2 The more important question is whether the presence of COVID-19 constitutes “direct 3 physical loss or damage” under Wisconsin law.6 Defendants contend that the presence of 4 COVID-19 cannot constitute “direct physical loss or damage” because COVID-19 harms people, 5 not property. Opp. at 15. In support, Defendants point to the Period of Restoration limitation to 6 the Business Interruption and Extra Expense coverage, which allows coverage only until the 7 damaged property at issue is “repaired, rebuilt or replaced.” Mot. at 10; see Policy at 19, 23. 8 Because COVID-19 “can be eliminated from property through simple cleaning and disinfecting” 9 the “presence of COVID-19 on property does not necessitate physical repair of that property” and 10 so “it strains reason to view a virus as injuring property.” Mot. at 14. 11 Menominee argues that COVID-19 cannot be eliminated by simple cleaning and 12 disinfecting. Opp. at 17. It pleaded that “[m]erely cleaning surfaces may reduce but does not 13 altogether eliminate the risk of transmission” because “a space may remain contaminated if an 14 aerosol is present, and immediately become contaminated thereafter if another infected person is 15 present in the area.” FAC ¶ 92. But Defendants do not argue that cleaning eliminates the risk of 16 transmission or prevents the premises from being affected by COVID-19 again. Instead, they 17 contend that cleaning shows there is no need for the property to be repaired, rebuilt, or replaced, as 18 required under the Policy to trigger coverage. 19 Numerous courts in this district and across the nation have considered this question and 20 held that COVID-19 cannot constitute “direct physical loss or damage” because COVID-19 cannot 21 22 6 Menominee incorrectly argues that in Water Sports Kauai, Inc. v. Fireman's Fund Ins. Co., 499 23 F. Supp. 3d 670 (N.D. Cal. 2020) (“Water Sports Kauai I”), I held that if there is sufficient evidence that COVID-19 was present at the property and there was an imminent threat from 24 COVID-19’s presence, there is “direct physical loss or damage” to the property. See Opp. at 11. I 25 only held that if this broader test applied, the plaintiff’s allegations did not trigger coverage because it did not plausibly allege that an actual exposure of COVID-19 caused them to close a 26 particular store or set of stores. Id. at 675. I expressly left open the question of whether the presence of COVID-19 can constitute “direct physical loss or damage” because “coronavirus does 27 not physically impact the stores, can be readily cleaned up, and affects people not properties.” 1 “damage” property when it can easily be cleaned from surfaces.7 Opp. at 15–16. To be sure, all 2 of the cases from this district on which Defendants rely apply California law. But California law 3 interprets “direct physical loss” similarly to the Biltrite court; it requires a “distinct, demonstrable, 4 physical alteration of the property” or a “physical change in the condition of the property.” 5 Barbizon Sch. of San Francisco, Inc. v. Sentinel Ins. Co. LTD., No. 20-CV-08578-TSH, 2021 WL 6 1222161, at *7 (N.D. Cal. Mar. 31, 2021). Likewise, the other cases nationwide, which also 7 conclude that COVID-19 cannot constitute “direct physical loss” in part because the coronavirus 8 can be easily eliminated by cleaning, are decided under state laws that interpret “direct physical 9 loss” to require some physical damage to the property.8 See Mot. at 15 n.5. Menominee asserts 10

11 7 See, e.g., Barbizon Sch. of San Francisco, Inc. v. Sentinel Ins. Co. LTD., No. 20-CV-08578-TSH, 2021 WL 1222161, at *9 (N.D. Cal. Mar. 31, 2021) (concluding that there was no plausible 12 allegation of “direct physical loss or damage” in part because “the virus fails to cause physical alteration of property” and it “‘can be disinfected and cleaned’ from surfaces”) (collecting cases); 13 Baker v. Oregon Mut. Ins. Co., No. 20-CV-05467-LB, 2021 WL 1145882, at *3 (N.D. Cal. Mar. 14 25, 2021) (holding that it was implausible that “‘hazardous human respiratory droplets [ ] posed an immediate danger to any person(s) physically present on the premises’ and that it was 15 ‘impracticable to operate [the] business without immediately exposing the insured premises to’ the hazardous droplets”) (collecting cases); Out W. Rest. Grp. Inc. v. Affiliated FM Ins. Co., No. 16 20-CV-06786-TSH, 2021 WL 1056627, at *3 (N.D. Cal. Mar. 19, 2021) (rejecting argument that “[t]he presence of COVID-19 constitutes the requisite ‘damage’ to trigger coverage”) (collecting 17 cases); Protege Rest. Partners LLC v. Sentinel Ins. Co., Ltd., No. 20-CV-03674-BLF, 2021 WL 18 428653, at *4 (N.D. Cal. Feb. 8, 2021) (concluding that “a high risk that COVID-19 particles were present on . . . property” does not constitute physical damage and that even a “specific instance of 19 COVID-19 particles inside of [a] business” would still “not qualify as a ‘physical change’ to the property”); Kevin Barry Fine Art Assocs. v. Sentinel Ins. Co., Ltd., No. 20-CV-04783-SK, 2021 20 WL 141180, at *6 (N.D. Cal. Jan. 13, 2021) (concluding that “[e]ven if [the insured] had included allegations regarding the virus being present on and damaging the property, they would not be 21 plausible. . . . The virus COVID-19 harms people, not property.”) (collecting cases).

22 8 See Am. Food Sys., Inc. v. Fireman’s Fund Ins. Co., 2021 WL 1131640, at *4 (D. Mass. Mar. 24, 2021) (under Massachusetts law, “direct physical loss or damage” “could not ‘be construed to 23 cover physical loss in the absence of some physical damage to the insured’s property’”); Bachman’s Inc. v. Florists’ Mut. Ins. Co., 2021 WL 981246, at *4 (D. Minn. Mar. 16, 2021) 24 (under Minnesota law, direct physical loss of property “requires a showing that the insured property is injured in some way”); Skillets, LLC v. Colony Ins. Co., 2021 WL 926211, at *7 (E.D. 25 Va. Mar. 10, 2021) (acknowledging that the Eleventh Circuit defined “direct physical loss” as actual damage and representing the “diminution of value of something” when applying Florida 26 law); B St. Grill & Bar LLC v. Cincinnati Ins. Co., 2021 WL 857361, at *5 (D. Ariz. Mar. 8, 2021) (under Arizona law, “direct physical loss” requires “actual physical damage” to the covered 27 premises); Food for Thought Caterers Corp. v. Sentinel Ins. Co., Ltd., 2021 WL 860345, at *5 1 that COVID-19 physically alters and damages property because “[w]hen the coronavirus and 2 COVID-19 attach to and adhere on surfaces and materials, they become part of those surfaces and 3 materials, converting the surfaces and materials to fomites” and “[t]his represents a physical 4 change in the affected surface or material.” FAC ¶ 91; Opp. at 16–17. This is unpersuasive,

5 especially in light of the numerous cases across the nation holding otherwise. Under the Biltrite 6 court’s interpretation of “direct physical loss,” which requires physical damage, the presence of 7 COVID-19 would not trigger coverage. 8 Under the line of Wisconsin cases that do not require physical damage for “direct physical 9 loss,” Menominee’s allegations also fail because it did not plead a “causal physical event” for the 10 loss.9 See Al Johnson’s, Hr’g Tr. at 15–16 (holding that the period of restoration 11 requirement—that the property be “repaired, rebuilt or replaced”—meant that “loss of use without

12 more does not constitute direct physical loss or damage.”). In Manpower, the court found that the 13 loss was “physical” because “it was caused by a physical event—the collapse [of the 14 building]—which created a physical barrier between the insured and its property. It was not an

15 ‘intangible’ or ‘incorporeal’ loss.” Manpower, 2009 WL 3738099, at *6. In this case, the 16 presence of a virus, which can be eliminated through cleaning and disinfecting, would not 17 constitute a “physical event” that caused the loss. See Casey, 353 Wis. 2d at 365 (“policies should 18 be construed to avoid absurd or unreasonable results.”). 19 20 include “loss of use” of the insured premises); Circus LV, LP v. AIG Specialty Ins. Co., 2021 WL 21 769660, at *4 (D. Nev. Feb. 26, 2021) (noting that the Nevada Supreme Court has “generally cabined claims for coverage under similar policies to plaintiffs who allege some sort of structural 22 or physical change to a property, which actually altered its functionality or use” when interpreting the term “direct physical loss or damage”); Terry Black’s Barbecue, LLC v. State Auto. Mut. Ins. 23 Co., 2021 WL 972878, at *8 (W.D. Tex. Jan. 21, 2021) (acknowledging that other courts under Texas law found that “physical loss” requires a “distinct, demonstrable, physical alteration of the 24 property”); KD Unlimited, 2021 WL 81660, at *5 (N.D. Ga. Jan. 5, 2021) (acknowledging that the Eleventh Circuit has explained that “direct physical loss” requires “that the damage be actual”). 25 9 The only Wisconsin law case that addresses whether the presence of COVID-19 constitutes 26 “direct physical loss or damage” is In re Society, 2021 WL 679109. But as established above, the court’s conclusion that loss of use can constitute “direct physical loss” contradicts the other 27 Wisconsin cases that conclude that loss of use, even loss of use of a physical space, is not enough 1 Menominee asserts that the presence of COVID-19 not only required increased cleaning 2 and sanitizing but also “required the installation of physical barriers” at “MCR, Thunderbird, and 3 the Clinic” and that “[s]ignificant repair and remediation was required before use of the properties 4 could be permitted without risking further physical damage to property.” Opp. at 17–18; FAC ¶¶ 5 14–16. The In re Society court addressed a similar “period of restoration” limitation and found 6 that “there is nothing inherent in the meanings of [‘repaired’ and ‘replaced’] that would be 7 inconsistent with characterizing the Plaintiffs’ loss of their space due to the shutdown orders as a 8 physical loss.” In re Soc'y, 2021 WL 679109, at *9. The court explained that, 9 “For example, the coronavirus risk could be minimized by the installation of partitions and a particular ventilation system, then the 10 restaurants would be expected to ‘repair’ the space by installing those safety features. As another example, if a restaurant could mitigate the 11 loss caused by a percentage-capacity limit by ‘replacing’ some of its dining-room space by opening its adjacent banquet-hall room to 12 increase the number of guests it could serve, then the restaurant would be expected to ‘replace’ the loss of space by doing so.” 13 Id. 14 I disagree. Installing physical barriers and increasing cleaning and sanitizing do not 15 “repair” the property, as fixing a roof dented by hail would, for example. See Advance Cable, 788 16 F.3d at 746. As a Pennsylvania district court noted, “[i]n ordinary parlance, we repair what is 17 broken” and In re Society contorts the Period of Restoration provision “far beyond their ordinary 18 meaning.” Tria WS LLC v. Am. Auto. Ins. Co., 2021 WL 1193370, at *7 n.5 (E.D. Pa. Mar. 30, 19 2021). Menominee has “not alleged any unsatisfactory condition on the insured properties” that 20 would be fixed through repair, replacement, or rebuild. See id. Accordingly, the presence of 21 COVID-19 cannot constitute “direct physical loss or damage” under the Policy. 22 3. Loss Causation 23 The Business Interruption and Extra Expense coverage provisions also requires that any 24 direct physical loss or damage must “cause” an interruption in Menominee’s business. See Policy 25 at 19. Menominee fails to plausibly plead causation because neither the Closure Orders nor the 26 coronavirus constitutes “direct physical loss or damage” that caused the business interruption. 27 Defendants focus on Menominee’s alleged failure to plausibly plead that the actual 1 presence of COVID-19 caused any interruption. Mot. at 16. According to the Defendants, the 2 FAC “alleges that some unspecified number of COVID-19 carrying individuals ‘entered’ insured 3 properties ‘during the period of the Policy,’ but the FAC does not show that these individuals 4 actually caused certain premises to close or change operations.” Reply at 5; see FAC ¶ 139. 5 Instead, Menominee pleaded that the MCR closed on March 19, July 31, and September 16, 2020, 6 which were the same dates as the effective dates of the Closure Orders. See FAC ¶¶ 120, 123, 7 125. Defendants argue that the Closure Orders alone caused Menominee’s business interruptions, 8 not the actual presence of COVID-19 on any insured property. Mot. at 17–18. Business 9 interruption due to Closure Orders is not sufficient to show causation from “direct physical loss.” 10 See, e.g., Al Johnson’s, Hr’g Tr. at 16–17, 19 (finding no causation because “the suspension must

11 be caused by the direct physical loss” and government shut down orders, which caused the loss, 12 was not a physical loss). 13 In response, Menominee argues that it has specifically pleaded facts establishing that 14 COVID-19 directly caused their business interruptions and that it has “satisfied causation 15 requirements to establish at a minimum that COVID-19 is a proximate cause of the Menominee’s 16 business interruption losses.” Opp. at 18. Under Wisconsin law, “[i]n the context of a property 17 insurance policy, the word ‘direct’ indicates that the policy covers only losses and damage [that 18 are immediately or] proximately caused by a covered period—that is, it means that the policy does 19 not cover remote losses.” Manpower, 2009 WL 3738099, at *6. 20 Menominee asserts that the Closure Orders would not exist but for the presence of 21 COVID-19 and therefore it has sufficiently pleaded causation. Id. But as established above, 22 COVID-19 alone cannot constitute a “direct physical loss.” The cases on which Menominee relies 23 are distinguishable because they concern a distinct policy provision or hold that the coronavirus 24 can trigger coverage under the business interruption provision. See, e.g., Boxed Foods Co., LLC v. 25 California Cap. Ins. Co., 497 F. Supp. 3d 516, 522 (N.D. Cal. 2020), as amended (Oct. 27, 2020) 26 (holding that COVID-19 is an efficient proximate cause of the loss and so the virus exclusion 27 provision applies under California law); In re Soc’y, 2021 WL 679109, at *8 (holding that because 1 COVID-19 proximately caused the business interruptions even if the government shutdown orders 2 played a causal role in the loss); see also Manpower 2009 WL 3738099, at *6 (holding that the 3 collapse of a building was a “direct physical loss” because the collapse was the proximate cause of 4 the plaintiff’s loss of its interest in its property). Menominee has not alleged and cannot plausibly 5 allege that “direct physical loss or damage” caused the interruption and therefore cannot receive 6 coverage under the Business Interruption or Extra Expense provisions. 7 B. Interruption by Civil Authority Coverage 8 Next, for the Interruption by Civil Authority coverage to apply, there must be an “actual 9 loss” sustained by Menominee, “when as a direct result of damage to or destruction of property by 10 a covered peril(s) occurring at a property located within a 10 mile radius of the covered property, 11 access to the covered property is specifically prohibited by order of a civil authority.” Policy at 12 20. Menominee contends that the Closure Orders satisfy this provision of coverage because the 13 “Closure Orders were issued in response to the physical presence of the coronavirus at properties 14 in Menominee and Wisconsin, including property within a 10 mile radius of Plaintiff’s properties, 15 and the imminent threat of further physical spread of the virus and resulting danger to 16 individuals.” FAC ¶ 144; Opp. at 19–21. Menominee also argues that COVID-19 caused damage 17 to property located within a 10 mile radius of the insured property in the same manner that it 18 caused direct physical loss or damage to the insured property and the Closure Orders “prohibited 19 access within a ten-mile radius area that included covered property.” FAC ¶ 201. 20 Defendants argue that these allegations are generic and conclusory. Mot. at 21; see FAC 21 ¶¶ 101–34. I agree. Menominee does not allege that (1) a property within 10 miles of its insured 22 property was physically damaged or destroyed or (2) that property damage at an insured property 23 resulted in the Closure Orders, as required by the provision. Mot. at 21–22. As established above, 24 the presence of COVID-19 cannot constitute “damage to property” and so even if Menominee 25 alleged that the Closure Orders were issued “in response to the physical presence of the 26 coronavirus” its claims would fail. See FAC ¶ 144. Moreover, Menominee claims that the 27 Closure Orders were issued “to mitigate the spread of COVID-19”; they were not issued due to 1 Laundry & Cleaners, Inc. v. Factory Ins. Ass’n, 59 Wis. 2d 145, 146–48 (1973) (per curiam) 2 (concluding under Wisconsin law that coverage under a similar provision did not apply where the 3 insured premises were restricted by a curfew related to civil disturbances and not due to damage to 4 or destruction of the business property). It cannot plausibly allege the requisite facts to trigger 5 coverage under the Interruption by Civil Authority provision on the basis that COVID-19 was 6 present at the properties. 7 C. Ingress/Egress Coverage 8 Similar to the Civil Authority provision, coverage under the Ingress/Egress provision 9 requires (1) “actual loss sustained” as a “direct result of physical loss or damage caused by a 10 covered peril(s) specified by this Policy and occurring at property located within a 10 mile radius 11 of covered property”; and (2) that “ingress and egress from the covered property . . . is prevented.” 12 Policy at 66. Menominee reiterates its arguments in support of finding coverage under the Civil 13 Authority provision and asserts that direct physical loss or damage to nearby property prevented 14 access to the Menominee’s property. Opp. at 21. 15 The presence of COVID-19 cannot constitute physical loss or damage and Menominee’s 16 allegations that it did not have access to its insured property are implausible. Menominee pleaded 17 that “[d]ue to physical damage caused by the presence of the coronavirus, . . . Plaintiffs were 18 unable to permit their customers to access their interior spaces,” FAC ¶ 16, and “the actual and 19 potential physical presence of the virus on the property prevented patrons from accessing the 20 internal restaurant seating area.” FAC ¶ 146. But Menominee’s insured property was still 21 accessible; in fact, Menominee admits that its gift shop, convenience store, gas station, clinic, and 22 restaurant remained open. FAC ¶¶ 123, 125–29, 146. Therefore, employees had physical access 23 to Menominee’s businesses even if patrons were “prohibited” from entering. Id. Menominee 24 cannot state a plausible claim for Ingress/Egress coverage. See, e.g., Promotional Headwear Int'l 25 v. Cincinnati Ins. Co., 2020 WL 7078735, at *10 (D. Kan. Dec. 3, 2020) (“[T]he Complaint 26 admits that the premises [were] accessible despite the Stay at Home Orders. Therefore, assuming 27 as true the facts alleged in the Complaint, COVID-19 did not prevent ingress or egress from D. Contingent Time Element Coverage 1 The Contingent Time Element coverage requires “loss directly resulting from physical 2 damage to property . . . at direct supplier or direct customer locations that prevents a supplier of 3 goods and/or services to [Menominee] from supplying such goods and/or services, or that prevents 4 a recipient of goods and/or services from [Menominee] from accepting such goods and/or 5 services.” Policy at 20. Menominee asserts that it has alleged that “area hotels, restaurants, and 6 other businesses that facilitated travel by customers to MCR and Thunderbird experienced 7 exposure to and physical damage from the coronavirus.” FAC ¶ 149; Opp. at 21. In particular, 8 Menominee points to one business, the “War Bonnet Bar & Grill,” which was “forced to close for 9 everything but curbside carry-out orders.” FAC ¶ 149. But the presence of COVID-19 cannot 10 cause physical damage and Menominee does not “allege that the restaurant was in fact exposed to 11 COVID-19 or suffered physical damage that actually prevented it from ‘supplying Plaintiffs with 12 customers.’” Opp. at 24. Further, the fact that the War Bonnet Bar & Grill was open for curbside 13 carry out orders undermines its argument that the business was inoperable. Id. Menominee has 14 not alleged and cannot allege a plausible claim to trigger Contingent Time Element coverage. 15 E. Tax Revenue Interruption Coverage 16 The Tax Revenue Interruption coverage requires “loss resulting directly from necessary 17 interruption of sales, property or other tax revenue . . . caused by damage, or destruction . . . to 18 property which is not operated by [Menominee] and which wholly or partially prevents the 19 generation of revenue for [Menominee].” Policy at 21. Menominee asserts that it pleaded 20 “property damage across its holdings and on its reservation that affected its tax revenues” but 21 these allegations are once again conclusory. See FAC ¶¶ 66, 76, 218 (alleging for example, that 22 “COVID-19 caused damage to contributing property in the same manner that it did with Plaintiffs’ 23 covered property, as described herein, resulting in interruption of Tribal Incremental Municipal 24 Services Payments, sales tax, property tax, and other tax revenue.”). Because COVID-19 cannot 25 cause damage to contributing property as it cannot for insured property, Menominee’s claim under 26 the Tax Revenue Interruption provision is likewise implausible. 27 F. Protection and Preservation of Property Coverage Finally, coverage under the Protection and Preservation of Property provision applies to “expenses incurred by [Menominee] in taking reasonable and necessary actions for the temporary ° protection and preservation of property insured” when there is “actual or imminent physical loss or damage.” Policy at 13. Menominee alleged that the “installation of physical barriers and ° increased cleaning and sanitizing” were done to remediate property and avoid imminent threat of ° future property damage or loss. FAC {] 147; Opp. at 22-23. As Defendants assert, such an ’ allegation is implausible because these “actions protected people from COVID-19 transmission, ° not property from physical damage.” Mot. at 25 (emphasis in original). Menominee also does not ° have a plausible claim for coverage under the Protection and Preservation of Property provision. In sum, because the presence of COVID-19 cannot constitute “direct physical loss or " damage” under Wisconsin law, any amendment to Menominee’s claims would be futile. Accordingly, all of the Defendants’ motions related to Lexington’s motion to dismiss the FAC are GRANTED with prejudice. See Lopez, 203 F.3d at 1127 (holding that a court does not have to S grant leave to amend when “‘it determines that the pleading could not possibly be cured by the allegation of other facts.”). CONCLUSION For the reasons above, Defendants’ motions to dismiss Menominee’s FAC are GRANTED 18 with prejudice. Judgment shall be entered in accordance with this Order. IT IS SO ORDERED. Dated: August 23, 2021 21

23 iam H. Orrick United States District Judge 25 26 27 28