From Cozen & O’Connor:
“On appeal, the insured maintained that the COVID-19 pandemic and the related government-imposed restrictions on performing non-emergency dental procedures constituted a “direct ‘loss’ to property” because the insured was unable to fully use its offices. The insured argued that the policy’s disjunctive definition of loss as physical loss or physical damage created an ambiguity that must be construed against the insurer. To give the terms separate meanings, the insured suggested defining physical loss to include “lost operations or inability to use the business” and defining physical damage as a physical alteration to property.
Interpreting Iowa law, the Eighth Circuit held that the policy required “some physicality to the loss or damage of property — e.g., a physical alteration, physical contamination, or physical destruction.” The court held that the policy could not reasonably be interpreted to cover mere loss of use when the insured’s property has suffered no “physical loss or damage.” To support its interpretation of the coverage provision, the court noted that the policy provided coverage for lost business income and extra expense during the “period of restoration,” which was defined as beginning on the date when the property “should be repaired, rebuilt or replaced.” This definition, the court pointed out, assumed physical alteration of the property, not mere loss of use.”