CIRCLE BLOCK PARTNERS, LLC v. FIREMAN'S FUND INSURANCE COMPANY

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF INDIANA

INDIANAPOLIS DIVISION

CIRCLE BLOCK PARTNERS, LLC, )

CIRCLE BLOCK HOTEL, LLC, )

)

Plaintiffs, )

)

v. ) No. 1:20-cv-02512-JPH-MJD

)

FIREMAN'S FUND INSURANCE )

COMPANY, )

)

Defendant. )

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS

The owners of the Conrad Hotel located in downtown Indianapolis

brought this case after the Conrad's business plummeted during the COVID-19

pandemic. They filed a property insurance claim for losses with the Conrad's

insurer, Fireman's Fund Insurance Company, but the claim was denied. In

this case, the owners allege that Fireman's Fund breached the insurance

contract when it denied the claim, and they seek a declaratory judgment of

insurance coverage. Fireman's Fund has filed a motion to dismiss for failure to

state a claim. For the reasons below, that motion is GRANTED.

I.

Facts and Background

Because Fireman's Fund has moved for dismissal under Rule 12(b)(6),

the Court accepts and recites "the well-pleaded facts in the complaint as true."

McCauley v. City of Chicago, 671 F.3d 611, 616 (7th Cir. 2011).

Circle Block Partners, LLC and Circle Block Hotel, LLC (together, "Circle

Block") own the Conrad Hotel in downtown Indianapolis. Dkt. 1-2 at 7 ¶ 1.

Circle Block purchased a commercial property insurance policy ("the Policy")

from Fireman's Fund to cover the property. Id. at 7–8 ¶¶ 1–3. The Policy

provides up to $104 million in coverage for real and personal business property

and up to $12.25 million in coverage for business income and extra expenses.

Id. at 8 (Complaint ¶ 3), 49 (Policy). The Policy also provides $1 million in

communicable disease coverage, $2.5 million in civil authority coverage,

$1 million in dependent property coverage, and $2.5 million in business access

coverage. Id. at 17 ¶ 42.

In March 2020, Indiana declared "that a public health disaster

emergency exists in Indiana attributable to COVID-19." Id. at 13–14 ¶ 28.

Indiana and Indianapolis issued orders prohibiting non-essential travel,

cancelling large gatherings, and limiting hotel use to lodging and carryout

services. Id. at 13 ¶ 27. Because of the public health emergency associated

with COVID-19 and these orders, "Indianapolis lost well over 100,000 visitors

expected to travel to the city." Id. at 16 ¶ 39.

During this time, the Conrad's "occupancy rates . . . dropped

precipitously into the single digits as patrons cancelled their reservations and

new bookings came to a halt." Id. at 22 ¶ 62. "By March 19, 2020, only six of

the hotel's 247 rooms were occupied," and the hotel suspended operations

entirely on April 18, 2020. Id. The Conrad thus "lost virtually all of its

business income during this time," yet it still had ordinary business expenses

and incurred "significant additional expenses for cleaning and disinfecting the

[p]roperty." Id. ¶ 63.

On March 23, 2020, Circle Block submitted notice of its claims to

Fireman's Fund, id. at 28 ¶ 87, and Fireman's Fund denied the claims on

September 2, 2020, id. ¶¶ 90–91. Two days later, Circle Block filed this suit in

Indiana state court, alleging breach of contract and seeking a declaratory

judgment of coverage under the Policy. Id. at 7, 29–30. Fireman's Fund

removed the case to this court, dkt. 1, and has moved to dismiss the complaint

for failure to state a claim, dkt. 19.

II.

Applicable Law

Defendants may move under Federal Rule of Civil Procedure 12(b)(6) to

dismiss claims for "failure to state a claim upon which relief can be granted."

Fed. R. Civ. P. 12(b)(6). To survive a Rule 12(b)(6) motion to dismiss, "a

complaint must contain sufficient factual matter, accepted as true, to 'state a

claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662,

678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A

facially plausible claim is one "that allows the court to draw the reasonable

inference that the defendant is liable for the misconduct alleged." Id.

When ruling on a 12(b)(6) motion, the Court will "accept the well-pleaded

facts in the complaint as true," but will not defer to "legal conclusions and

conclusory allegations merely reciting the elements of the claim." McCauley,

671 F.3d at 616. Indiana substantive law governs this case. See Webber v.

Butner, 923 F.3d 479, 480–81 (7th Cir. 2019).

III.

Analysis

A. Policy Provisions

Circle Block argues that its losses are covered under one or more of five

Policy provisions, all of which require "direct physical loss or damage" to either

the property or to "a dependent property":

(1) Business Income and Extra Expense Coverage: "[W]e will

pay for the actual loss of business income and necessary extra

expense you sustain due to the necessary suspension of your

operations during the period of restoration1 arising from direct

physical loss or damage to property at a location, or within 1,000

feet of such location, caused by or resulting from a covered cause

of loss,"2 dkt. 1-2 at 61 (emphasis added);

(2) Business Access Coverage: "We will pay for the actual loss

of business income and necessary extra expense you sustain due

to the necessary suspension of operations at a location if access

to such location is impaired or obstructed. Such impairment or

obstruction must . . . [a]rise from direct physical loss or damage

to property other than at such location; and . . . [b]e caused by

or result from a covered cause of loss; and . . . [o]ccur within [1

mile] . . . from such location," id. at 51, 73 (emphasis added);

1 "Period of restoration means the period of time that begins immediately after the time of direct

physical loss or damage caused by or resulting from a covered cause of loss to property . . ."

Dkt. 1-2 at 74, 113 (emphasis added).

2 "Covered cause of loss means risks of direct physical loss or damage not excluded or limited in

this Coverage Form." Dkt. 1-2 at 107 ¶ 13 (emphasis added).

(3) Communicable Disease Coverage: "We will pay for direct

physical loss or damage to Property Insured caused by or

resulting from a covered communicable disease event at a

location including the following necessary costs incurred to:

(a) [t]ear out and replace any part of Property Insured in order to

gain access to the communicable disease; (b) [r]epair or rebuild

Property Insured which has been damaged or destroyed by the

communicable disease; and (c) [m]itigate, contain, remediate,

treat, clean, detoxify, disinfect, neutralize, cleanup, remove,

dispose of, test for, monitor, and assess the effects the

communicable disease," id. at 76–77 (emphasis added).

(4) Civil Authority Coverage: "We will pay for the actual loss of

business income and necessary extra expense you sustain due

to the necessary suspension of your operations caused by action

of civil authority that prohibits access to a location. Such

prohibition of access to such location by a civil authority must .

. . [a]rise from direct physical loss or damage to property other

than at such location; and . . . [b]e caused by or result from a

covered cause of loss; and . . . [o]ccur within [1 mile] . . . from

such location," id. at 51, 73 (emphasis added); and

(5) Dependent Property Coverage: "We will pay for the actual

loss of business income and necessary extra expense you sustain

due to the necessary suspension of operations during the period

of restoration at a location. The suspension must be due to direct

physical loss or damage at the location of a dependent property .

. . caused by or resulting from a covered cause of loss," id. at 73

(emphasis added).

See dkt. 36; dkt. 20 at 12–15.

B. "Direct Physical Loss or Damage to Property"

Federal jurisdiction in this case is based on diversity, and the parties

agree that Indiana law applies. See dkt. 20; dkt. 36. The Court "must apply

Indiana law by doing [its] best to predict how the Indiana Supreme Court would

decide" the issue. Webber, 923 F.3d at 482; see Frye v. Auto-Owners Ins. Co.,

845 F.3d 782, 788 (7th Cir. 2017). "Insurance policies are contracts subject to

the same rules of judicial construction as other contracts." Erie Indem. Co. for

Subscribers at Erie Ins. Exch. v. Est. of Harris by Harris, 99 N.E.3d 625, 630

(Ind. 2018) (citation omitted). "When confronted with a dispute over the

meaning of insurance policy terms, Indiana courts afford clear and

unambiguous policy language its plain, ordinary meaning." Id. But "[w]here

there is ambiguity, insurance policies are construed strictly against the

insurer, and the policy language is viewed from the standpoint of the insured."

State Farm Mut. Auto. Ins. Co. v. Jakubowicz, 56 N.E.3d 617, 619 (Ind. 2016).

A court's "first task, therefore, is to determine whether the policy term at issue

is ambiguous." Erie, 99 N.E.3d at 630.

Fireman's Fund contends that "direct physical loss or damage to

property" requires "direct destruction or physical alteration of property." Dkt.

20 at 18. In contrast, Circle Block argues that "direct physical loss"3 can mean

a "quantifiable loss in the property's usefulness or function for normal

purposes," so the phrase is at least ambiguous. See dkt. 36 at 16–18.

The Policy does not define the phrase "direct physical loss," see dkt. 20 at

18; dkt. 36 at 8, but that does not make it ambiguous, see Erie, 99 N.E.3d at

630 ("[F]ailing to define a policy term merely means it has no exclusive special

meaning, and the courts can interpret it."). Instead, the phrase is "ambiguous

only if it is susceptible to more than one reasonable interpretation." G&G Oil

Co. of Indiana v. Cont'l W. Ins. Co., 165 N.E.3d 82, 87 (Ind. 2021) (citations and

3 Circle Block argues only that the "loss" portion of the "direct physical loss or damage" clause

provides it coverage. See dkt. 36 at 16–17 ("Circle Block need only plausibly allege 'direct

physical loss,' which means something different from 'direct physical damage.'"). Therefore,

this order addresses only the "loss" alternative under the provision.

emphasis omitted). In other words, the question is whether "reasonably

intelligent policyholders could . . . legitimately disagree as to what the [phrase]

means." Id.

The interpretation of "direct physical loss" is informed by "sources that

reflect the ordinary meaning of the term at the time the contract was executed,"

including dictionaries. Reuille v. E.E. Brandenberger Const., Inc., 888 N.E.2d

770, 771 (Ind. 2008); see, e.g., Med. Protective Co. of Fort Wayne, Indiana v. Am.

Int'l Specialty Lines Ins. Co., 990 F.3d 1003, 1012 (7th Cir. 2021) (applying an

undefined insurance policy term's "ordinary meaning"). Both parties cite the

Merriam-Webster.com dictionary, which defines the relevant terms to mean:

• Direct: "marked by absence of intervening agency,

instrumentality, or influence"

• Physical: "of or relating to, material things"

• Loss: "the harm or privation resulting from loss or

separation"

See Merriam-Webster.com Dictionary;4 dkt. 20 at 18; see dkt. 36 at 17.

The adjectives "direct" and "physical" modify the noun "loss," so the loss

(harm or privation) must be both "direct" (marked by absence of an

intervening force) and "physical" (of or relating to a material thing). See

Rimini St., Inc. v. Oracle USA, Inc., 139 S. Ct. 873, 878 (2019) ("Adjectives

modify nouns—they pick out a subset of a category that possesses a

certain quality.") (citation omitted).

4 https://www.merriam-webster.com (last visited July 21, 2021).

As a result, "direct physical loss" to property requires a harmful

alteration in the appearance, shape, color, composition, or other material

dimension of the property, excluding situations in which an intervening force

plays some role. See, e.g., Georgetown Dental, LLC v. Cincinnati Ins. Co., No.

1:21-cv-00383, 2021 WL1967180, at *7 (S.D. Ind. May 17, 2021) ("Consistent

with the emerging lion's share of cases, the Court determines that this

'physical loss' or 'physical damage' must be actual and demonstrable physical

harm . . . ."); MHG Hotels, LLC v. Emasco Ins. Co., Inc., No. 1:20-cv-1620, slip

op. at 11 (S.D. Ind. March 8, 2021) (holding that "the phrase 'direct physical

loss' refers to a loss that requires the insured to repair, rebuild, or replace

property that has been tangibly, physically altered – not the insured's loss of

use of that property."); Indiana Repertory Theatre, Inc. v. Cincinnati Cas. Co.,

No. 49D01-2004-PL-013137, slip op. at 26 (Ind. Marion Cty. Sup. Ct. Mar. 12,

2021) ("If loss of use alone qualified as direct physical loss to property, then the

term 'physical' would have no meaning."); Steven Plitt et al., 10A Couch on

Insurance § 148:46 (3d ed. 2021) ("The requirement that the loss be 'physical,'

given the ordinary definition of that term, is widely held to exclude alleged

losses that are intangible or incorporeal . . . .").

Circle Block's complaint alleges that the Conrad Hotel's occupancy rates

(and thus its revenue) dropped "as patrons cancelled their reservations and

new bookings came to a halt," causing it to "suspend its operations" when

remaining open became "untenable." Dkt. 1-2 at 22 ¶¶ 62–63. Even when

accepted as true, these allegations attribute the lost revenue to changes in

human behavior, not a harmful physical change to the Conrad or the property

located within it. Cf. Uncork & Create LLC v. Cincinnati Ins. Co., 498 F. Supp.

3d 878, 884 (S.D. W. Va. 2020) (noting that "the pandemic impact[ed] . . .

human behavior," which "caused the Plaintiff economic losses."). And Circle

Block's interpretation of "direct physical loss" to property ("quantifiable loss in

the property's usefulness or function for normal purposes") reads "physical" out

of the Policy. See dkt. 36 at 18 (arguing that the Court "should reject the

invented requirement of . . . 'physical alteration' put forth by Fireman's Fund").

Because the Conrad Hotel's loss in business caused by the COVID-19

pandemic did not arise from an alteration in the appearance, shape, color,

composition, or other material dimension of the property, it is not a "direct

physical loss" to the property.

Circle Block contends that Indiana courts have interpreted the phrase

"direct physical loss" to include situations where there has not been any

alteration to a material dimension of a property. See dkt. 36 at 10. Circle

Block cites Cook v. Allstate Ins. Co., No. 48D02-0611-PL-01156, 2007 Ind.

Super. LEXIS 32 (Madison Cty. Super. Ct. Nov. 30, 2007), for the proposition

that the contractual term "direct physical loss" is satisfied when a "physical

condition" renders property unsuitable for its intended use. See dkt. 36 at 10.

Cook involved the infestation of a home by poisonous brown recluse spiders.

2007 Ind. Super. LEXIS 32, at *1–3. The parties filed cross motions for

summary judgment on the issue of whether there was a "sudden and

accidental direct physical loss" as required under the policy. Id. at *7. The

court held that the insurer could not assert a coverage defense based on the

argument that there was no "sudden and accidental direct physical loss"

because it waited too long to raise it. Id. at *7–8. The insurer was foreclosed

from raising that defense under both the common law insurance doctrine of

"mend the hold," id., and waiver, id. at *8 n.1.

Only after making those holdings did the court discuss whether the

spider infestation constituted a "direct physical loss." See id. at *8. Because

that discussion relates to a third basis for granting summary judgment to Cook

on the issue of whether there was a "sudden and accidental direct physical

loss," see id., it was unnecessary to the holding and therefore dicta. Moreover,

Cook, an unpublished state trial court decision, does not cite any controlling

Indiana precedent (or any Indiana case for that matter) in support of the

statement that "[c]ase law demonstrates that a physical condition that renders

property unsuitable for its intended use constitutes a 'direct physical loss' even

where some utility remains and, in the case of a building, structural integrity

remains." 2007 Ind. Super. LEXIS 32, at *9–10. Cook does not support the

expansive interpretation of "direct physical loss" that Circle Block urges.

The next case that Circle Block relies upon, Ports of Indiana v. Lexington

Ins. Co., No. 1:09-CV-0854, 2011 WL 5523419 (S.D. Ind. Nov. 14, 2011),

similarly does not support the conclusion that Circle Block asks the Court to

reach. See dkt. 36 at 16. In Ports of Indiana, an Indiana port authority alleged

that it suffered "direct physical loss or damage" when erosion and low water

levels damaged nearly 2,000 feet of dock wall. 2011 WL 5523419, at *1. The

insurer did not dispute that 128 feet of dock wall had been physically damaged

but contended that the remainder of the dock was unharmed. See id. at *2.

Because the disputed portion of the wall was "largely underwater," the court

considered whether the remaining dock was damaged by assessing its

usefulness and functionality. See id. at *10. The Court expressly stated that it

was "not conflating usability with physical damage." Id. Here, in contrast,

there are no allegations that any part of the Conrad's structure was harmed.5

Still, Circle Block contends that these two cases––along with a few cases

applying other states' laws6––represent a division of authority and therefore

support a finding of ambiguity. See dkt. 36 at 27–32, 37. But division of

authority "is only evidence of ambiguity" and "does not establish conclusively

that a particular clause is ambiguous." Allgood v. Meridian Sec. Ins. Co., 836

N.E.2d 243, 248 (Ind. 2005) (holding insurance policy unambiguous despite

disagreement between jurisdictions); see Standard Mut. Ins. Co. v. Bailey, 868

F.2d 893, 896 n.4 (7th Cir. 1989) (holding that it's "clearly not the law in

Indiana" that an insurance policy is ambiguous "whenever there is a split in

authority on [its] scope").

5 This order finds no inconsistency with the holdings in Cook or Ports of Indiana, and neither

decision binds this Court. See King v. Ord. of United Com. Travelers of Am., 333 U.S. 153, 160–

61 (1948); Lodholtz v. York Risk Servs. Grp., Inc., 778 F.3d 635, 639–40 (7th Cir. 2015); TMF

Tool Co. v. Muller, 913 F.2d 1185, 1191 (7th Cir. 1990).

6 For example, Circle Block leans heavily on Studio 417, Inc. v. Cincinnati Ins. Co., 478 F. Supp.

3d 794 (W.D. Mo. 2020), which applied Missouri law to deny a motion to dismiss for a similar

COVID-19 insurance claim. See dkt. 36 at 27–29, 44. Yet Studio 417 emphasized that its

ruling was subject to further review and that "[s]ubsequent case law in the COVID-19 context,

construing similar provisions, and under similar facts, may be persuasive." See Studio 417,

478 F. Supp. 3d at 801, 805.

Regardless, there is not the split of authority that Circle Block imagines.

Instead, "the overwhelming majority of courts have found no coverage when

interpreting similar language," Crescent Plaza Hotel Owner L.P. v. Zurich Am.

Ins. Co., No. 20 C 3463, --- F. Supp. 3d ----, 2021 WL 633356, at *3 (N.D. Ill.

Feb. 18, 2021), and most courts that have considered the question have found

similar phrases unambiguous, see, e.g., Georgetown Dental, LLC, 2021 WL

1967180, at *7; MHG Hotels, LLC, No. 1:20-cv-1620, slip op. at 10–12; Indiana

Repertory Theatre, Inc., No. 49D01-2004-PL-013137, slip op. at 26–27; Oral

Surgeons, P.C. v. Cincinnati Ins. Co., No. 20-3211, --- F.4th ----, 2021 WL

2753874, at *2 (8th Cir. July 2, 2021); Sandy Point Dental, PC v. Cincinnati Ins.

Co., 488 F. Supp. 3d 690, 693–94 (N.D. Ill. 2020); Bradley Hotel Corp. v. Aspen

Specialty Ins. Co., 508 F. Supp. 3d 249, 254 (N.D. Ill. 2020); Biltrite Furniture,

Inc. v. Ohio Security Ins. Co., No. 20-CV-656, 2021 WL 3056191, at *4 (E.D.

Wis. July 20, 2021); G.O.A.T. Climb & Cryo, LLC v. Twin City Fire Ins. Co., No.

20 C 5644, 2021 WL 2853370, at *3 (N.D. Ill. July 8, 2021); Melcorp, Inc. v. W.

Am. Ins. Co., No. 20 C 4839, 2021 WL 2853371, at *4–8 (N.D. Ill. July 8, 2021);

CFIT Holding Corp. v. Twin City Fire Ins. Co., No. 20 C 3453, 2021 WL 2853376,

at *3 (N.D. Ill. July 8, 2021); Image Dental, LLC v. Citizens Ins. Co. of Am., No.

20-CV-02759, 2021 WL 2399988, at *8–9 (N.D. Ill. June 11, 2021); Chief of

Staff LLC v. Hiscox Ins. Co. Inc., No. 20 C 3169, --- F. Supp. 3d ----, 2021 WL

1208969, at *4 (N.D. Ill. Mar. 31, 2021); Zajas, Inc. v. Badger Mut. Ins. Co., No.

20-CV-1055, 2021 WL 1102403, at *3 (S.D. Ill. Mar. 23, 2021); Smeez, Inc. v.

Badger Mut. Ins. Co., 20-cv-1132, slip op. at 10 (S.D. Ill. Mar. 22, 2021); Bend

Hotel Dev. Co., LLC v. Cincinnati Ins. Co., No. 20 C 4636, --- F. Supp. 3d ----,

2021 WL 271294, at *3 (N.D. Ill. Jan. 27, 2021); TJBC, Inc. v. Cincinnati Ins.

Co., Inc., No. 3:20-CV-00815, 2021 WL 243583, at *4 (S.D. Ill. Jan. 25, 2021).

In sum, reasonably intelligent policyholders would not think that the

word "physical" has no meaning and should be ignored when interpreting the

ordinary meaning of the phrase "direct physical loss or damage to property."

See G&G Oil Co. of Indiana, 165 N.E.3d at 87. Reasonably intelligent

policyholders similarly would not think that a policy requiring "direct physical

loss or damage to property" would provide coverage where there is no physical

damage to the insured property but only a loss or reduction of the property's

usefulness or function for normal purposes. See id. The ordinary meaning of

the phrase "direct physical loss or damage to property" does not provide

coverage for economic losses caused by the COVID-19 pandemic in the absence

of any physical harm to the Conrad's building or the items located within it.

See Windridge of Naperville Condo. Ass'n v. Philadelphia Indem. Ins. Co., 932

F.3d 1035, 1040 n.4 (7th Cir. 2019) (applying Illinois law) ("[W]e have

acknowledged that the central meaning of the term physical injury as it is used

in everyday English—the image it would conjure up in the mind of a person

unschooled in the subtleties of insurance law—is of a harmful change in

appearance, shape, composition, or some other physical dimension of the

injured person or thing.") (citation omitted).

C. Other Allegations of Physical Loss or Damage to Property

Alternatively, Circle Block argues that it has plausibly alleged facts that

show or allow the Court to draw the reasonable inference that there was "direct

physical loss or damage" to the building or items located within it. See dkt. 36

at 14–15. In support, Circle Block points to allegations that the "physical

SARS-CoV-2 particles . . . attached to the Conrad property," dkt. 1-2 at 23

¶ 67, which caused it to incur "significant additional expenses for cleaning and

disinfecting the Property," id. at 22 ¶ 63.

But the Policy requires "direct physical loss or damage to property," not

merely a physical substance on property. See dkt. 20 at 12–15 (summarizing

relevant Policy provisions) (emphasis added). Although the virus may have

been present on surfaces at the Conrad Hotel as alleged, Circle Block has not

plausibly alleged that the virus caused the type of harm to the building itself or

items within it that is necessary to show "direct physical loss or damage to

property." See L&J Mattson's Co. v. Cincinnati Ins. Co., Inc., No. 20 C 7784, ---

F. Supp. 3d ----, 2021 WL 1688153, at *5 (N.D. Ill. Apr. 29, 2021) ("One does

not replace, rebuild or repair a countertop (or a doorknob or a floor) because

SARS-CoV-2 . . . is present on the surface. One simply cleans the surface.");

see Mama Jo's Inc. v. Sparta Ins. Co., 823 F. App'x 868, 879 (11th Cir. 2020),

cert. denied, No. 20-998, 2021 WL 1163753 (U.S. Mar. 29, 2021) ("[U]nder

Florida law, an item or structure that merely needs to be cleaned has not

suffered a 'loss' which is both 'direct' and 'physical.'"); Crescent Plaza Hotel

Owner L.P., 2021 WL 633356, at *3 ("[T]he coronavirus does not physically alter

the appearance, shape, color, structure, or other material dimension of the

property.").

Circle Block argues that physical SARS-CoV-2 particles are akin to other

substances that courts have found to satisfy similar contractual language

requiring physical harm. See dkt. 36 at 19–26. These cases, none of which

involve Indiana law, found the requirement of physical harm was or could be

met when losses were caused by bacteria, smoke, gasoline, oil vapor, ammonia,

carbon monoxide, lead particles, gas emitted from drywall, odors, pesticide,

risk of rockfall and collapse, and asbestos. See id. These conditions, however,

generally involve persistent physical contamination that requires repair or

replacement, rather than cleaning and disinfecting, to remediate. See Kim

Chee LLC v. Phil. Indem. Ins. Co., No. 1:20-CV-1136, --- F. Supp. 3d ----, 2021

WL 1600831, at *5–6 (W.D.N.Y. Apr. 23, 2021) (collecting cases on the

"spectrum" of these factual scenarios, with "persistent hazard[s]" generally

covered by similar insurance provisions and "easily remedied intrusion[s]"

typically left uncovered).

For example, Circle Block relies on Motorists Mut. Ins. Co. v. Hardinger,

131 F. App'x 823 (3d Cir. 2005), which held that a similar insurance provision

could cover a homeowner's losses caused by a bacterial contamination. See

dkt. 36 at 19. But that case involved a well that had tested positive for e-coli

bacteria for nearly two years that could not be fixed after multiple attempts,

rendering the home uninhabitable. Hardinger, 131 F. App'x at 824. The other

cases cited by Circle Block on this point involve similarly persistent physical

contamination that could only be remedied with repair, replacement, or

rebuilding. See, e.g., Essex Ins. Co. v. BloomSouth Flooring Corp., 562 F.3d

399, 401 (1st Cir. 2009) (offensive odor from carpet installation remained even

after the original carpet adhesive was scraped up and the floor was re-

carpeted); TRAVCO Ins. Co. v. Ward, 715 F. Supp. 2d 699, 703 (E.D. Va. 2010),

aff'd, 504 F. App'x 251 (4th Cir. 2013) (gradual emission of toxic gases from

drywall causing widespread impact to "HVAC coils, electrical wiring in outlets,

ground wires and other metallic surfaces"). The substances involved in these

cases thus differ from the COVID-19 virus, which Circle Block alleges is only

"detectable for several days," even without cleaning. See dkt. 1-2 at 12 ¶ 20.

* * *

At bottom, Circle Block has not plausibly alleged claims that satisfy the

Policy's requirement for a "direct physical loss" to property and thus its claims

must be dismissed.7 The complaint is dismissed with prejudice because Circle

Block has not offered "any meaningful indication of how it would plead

differently" if given the opportunity or how that could change the outcome here.

See, e.g., Gonzalez-Koeneke v. West, 791 F.3d 801, 808 (7th Cir. 2015) (citation

omitted); Fed. R. Civ. P. 41(b).

7 Circle Block contends that Fireman's Fund provided "no argument" on Dependent Property

Coverage, dkt. 36 at 39, but Fireman's Fund's brief addresses Dependent Property Coverage,

noting that it, like the other provisions, requires "'direct physical loss or damage to property,'"

dkt. 20 at 18.

IV.

Conclusion

Defendant's motion to dismiss is GRANTED. Dkt. [19]. Circle Block's

motion for oral argument, dkt. [38], and its motion to compel, dkt. [55], are

DENIED as moot. This case is DISMISSED with prejudice. Final judgment

shall issue by separate entry.

SO ORDERED.

Date: 7/27/2021

Sjamu Patrick lbanlove

James Patrick Hanlon

United States District Judge

Southern District of Indiana

17

Distribution:

Matthew Thomas Ciulla

MACGILL PC

matthew.ciulla@macgilllaw.com

John B. Drummy

KIGHTLINGER & GRAY, LLP (Indianapolis)

jdrummy@k-glaw.com

Brett Ingerman

DLA PIPER LLP

brett.ingerman@us.dlapiper.com

Robert D. MacGill

MACGILL PC

robert.macgill@macgilllaw.com

Brett Solberg

DLA PIPER LLP (US)

brett.solberg@dlapiper.com