COMMODORE, INC., D/B/A GREENSTREET CAFE v. CERTAIN UNDERWRITERS AT LLOYD'S LONDON, etc.

Third District Court of Appeal

State of Florida

Opinion filed May 11, 2022.

Not final until disposition of timely filed motion for rehearing.

________________

No. 3D21-0671

Lower Tribunal No. 20-10334

________________

Commodore, Inc. d/b/a GreenStreet Café, Inc.,

Appellant,

vs.

Certain Underwriters at Lloyd's London, etc., et al.,

Appellees.

An Appeal from the Circuit Court for Miami-Dade County, Michael A.

Hanzman, Judge.

Reed Smith LLP and R. Hugh Lumpkin and Christopher T. Kuleba, for

appellant.

White & Case LLP and Raoul G. Cantero and Zachary B. Dickens, for

appellees.

Angelo I. Amador (Washington, DC); Jenner & Block LLP and Gabriel

K. Gillett (Chicago, IL); Samantha H. Padgett (Tallahassee), for Restaurant

Law Center and Florida Restaurant and Lodging Association, as amici

curiae.

Robinson & Cole LLP and Eugene P. Murphy, for American Property

Casualty Insurance Association and National Association of Mutual

Insurance Companies, as amici curiae.

Before LOGUE, HENDON and LOBREE, JJ.

LOBREE, J.

Commodore, Inc. d/b/a GreenStreet Café, Inc. (“GreenStreet”), a

restaurant and bar located in the Coconut Grove neighborhood of Miami,

filed a claim with its commercial property insurer, Certain Underwriters at

Lloyd’s, London (“Lloyd’s”), for business income losses it suffered when it

suspended its operations during the COVID-19 pandemic. While Lloyd’s

was investigating the claim, GreenStreet sought a declaratory judgment that

the losses were covered under its insurance policy with Lloyd’s. The trial

court dismissed GreenStreet’s petition for declaratory relief with prejudice,

concluding that the policy at issue, which provided coverage for loss of

business income due to the suspension of operations “caused by direct

physical loss of or damage to property,” did not provide coverage for

GreenStreet’s losses because “‘direct physical loss . . .’ requires some

tangible alteration to insured property.” GreenStreet appeals from the final

judgment of dismissal of its petition for declaratory relief. Because the trial

court correctly determined that the economic losses allegedly suffered by

GreenStreet are not covered under the policy, we affirm.

2

Factual and Procedural Background

Lloyd’s issued an all-risk commercial property policy (the “Policy”) to

GreenStreet, effective from February 15, 2020, to February 15, 2021. The

Policy provides commercial property insurance “for direct physical loss of or

damage to Covered Property at the premises described in the Declarations

caused by or resulting from any Covered Cause of Loss.” Relevant here,

the Policy includes a Business Income (and Extra Expense) Coverage Form,

which reads, in part, as follows:

A. Coverage

1. Business Income

***

We will pay for the actual loss of Business income

you sustain due to the necessary “suspension” of

your “operations” during the “period of restoration”.

The “suspension” must be caused by direct physical

loss of or damage to property at premises which are

described in the Declarations and for which a

Business Income Limit Of Insurance is shown in the

Declarations. The loss or damage must be caused by

or result from a Covered Cause of Loss. . . .

***

2. Extra Expense

***

b. Extra Expense means necessary expenses you

incur during the “period of restoration” that you would

not have incurred if there had been no direct physical

loss or damage to property caused by or resulting

from a Covered Cause of Loss.

3

(emphasis added). The “period of restoration” is a defined term in the

Business Income (and Extra Expense) Coverage Form, and provides in

relevant part, as follows:

F. Definitions

***

3. “Period of restoration” means the period of time

that:

a. Begins 72 hours after the time of direct physical

loss or damage caused by or resulting from any

Covered Cause of Loss at the described premises;

and

b. Ends on the earlier of:

(1) The date when the property at the described

premises should be repaired, rebuilt or replaced with

reasonable speed and similar quality; or

(2) The date when business is resumed at a new

permanent location.

The policy does not contain a virus exclusion.

As was common throughout the country during the COVID-19 virus

pandemic, on March 15, 2020, the City of Miami issued a local emergency

measure stating that no business was permitted to operate at excess of 50%

of its authorized total occupancy load and limiting the hours of operations of

non-essential businesses. This emergency measure was followed shortly

thereafter by Miami-Dade County emergency order 03-20, which ordered

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restaurants with seating for more than eight people to close on-premises

service of customers and the City of Miami’s second amendment to local

emergency measures, which prohibited restaurants from serving food for

consumption in dining areas in premises. As a result of these orders,

GreenStreet suspended its operations. Notably, under the orders,

restaurants were still permitted to operate for delivery, pick-up, or take-out

services, and delivery personnel, employees, contractors, and janitorial

personnel were allowed access to the establishments. 1

GreenStreet promptly submitted a claim to Lloyd’s for its losses. After

Lloyd’s neither issued a coverage position nor paid the claim, GreenStreet

filed a petition for declaratory relief and damages seeking a declaratory

judgment that the economic losses it suffered due to the suspension of its

operations were covered under the Policy. GreenStreet alleged that the

emergency orders issued to minimize the spread of COVID-19 “effectively

limited on-premises dining and operations, resulting in a suspension of

necessary operations and an immediate loss of Business Income and Extra

Expense.” Although the Policy did not define the phrase “physical loss of or

damage to property,” GreenStreet claimed that the phrase is reasonably

1

At oral argument, GreenStreet acknowledged that after it suspended

operations on March 17, it later provided take-out dining services.

5

interpreted to include a case where the insured commercial property is

unusable for its intended income-producing use. In addition to loss of

business income, GreenStreet also alleged that it incurred extra expense

during the suspension of its business in the form of cleaning and disinfecting

costs.

Lloyd’s moved to dismiss the petition. After holding a hearing, the trial

court dismissed GreenStreet’s petition with prejudice and entered final

judgment in favor of Lloyd’s, 2 reasoning that “Florida precedent strongly

suggests that ‘direct physical loss of or damage to property’ requires some

tangible alteration to insured property, something Plaintiff has not—and

2

We note that the trial court procedurally erred in disposing of the issue of

coverage on Lloyd’s’ motion to dismiss. Express Damage Restoration, LLC

v. First Cmty. Ins. Co., 314 So. 3d 532, 534-35 (Fla. 3d DCA 2020) (holding

that trial court procedurally erred when it reached issue of construction of

insurance policy in dismissing complaint for declaratory judgment); see also

Smith v. City of Fort Myers, 898 So. 2d 1177, 1178 (Fla. 2d DCA 2005) (“In

determining the sufficiency of a complaint for declaratory judgment, the

question is whether the plaintiff is entitled to a declaration of rights, not

whether the plaintiff will prevail in obtaining the decree he or she seeks.”);

Floyd v. Guardian Life Ins. Co. of Am., 415 So. 2d 103, 105 (Fla. 3d DCA

1982) (“The possibility that a proper interpretation of the insurance policy

would result in a decree adverse to plaintiffs does not preclude their right to

a declaratory decree.”). However, GreenStreet expressly waived in its initial

brief any objection to this procedural error. Because a justiciable issue

existed between the parties, the trial court had jurisdiction to entertain

GreenStreet’s claim for declaratory relief, and we may reach the merits of

the coverage issue. Cf. State, Dept. of Env’t Prot. v. Garcia, 99 So. 3d 539,

545 (Fla. 3d DCA 2011).

6

cannot—allege.” GreenStreet’s appeal followed.

Standard of Review

“We review de novo an order dismissing a declaratory judgment count

for failure to state a cause of action.” Express Damage Restoration, LLC,

314 So. 3d at 534; accord Yacht Club by Luxcom, LLC v. Village of Palmetto

Bay, 306 So. 3d 268, 271 n.4 (Fla. 3d DCA 2020).

Analysis

“Under Florida law, an insurance policy is treated like a contract, and

therefore ordinary contract principles govern the interpretation and

construction of such policy.” Allstate Fire & Cas. Ins. Co. v. Hradecky, 208

So. 3d 184, 186 (Fla. 3d DCA 2016). On that basis, “we must follow the

guiding principle that [the Florida Supreme] Court has consistently applied

that insurance contracts must be construed in accordance with the plain

language of the policy.” Swire Pac. Holdings, Inc. v. Zurich Ins. Co., 845 So.

2d 161, 165 (Fla. 2003); accord State Farm Mut. Auto. Ins. Co. v. Menendez,

70 So. 3d 566, 569 (Fla. 2011) (“In interpreting an insurance contract, we are

bound by the plain meaning of the contract’s text.”); Auto-Owners Ins. Co. v.

Anderson, 756 So. 2d 29, 34 (Fla. 2000) (“Florida law provides that insurance

contracts are construed in accordance with the plain language of the policies

as bargained for by the parties.”). Thus, in the absence of “a genuine

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inconsistency, uncertainty, or ambiguity in meaning [that] remains after

resort to the ordinary rules of construction,” courts are not free to “rewrite

contracts, add meaning that is not present, or otherwise reach results

contrary to the intentions of the parties.” Excelsior Ins. Co. v. Pomona Park

Bar & Package Store, 369 So. 2d 938, 942 (Fla. 1979).

“[S]imply because a provision is complex and requires analysis for

application, it is not automatically rendered ambiguous.” Swire Pac.

Holdings, Inc., 845 So. 2d at 165; accord Menendez, 70 So. 3d at 570;

Grover Com. Enters. v. Aspen Ins. UK, Ltd., 202 So. 3d 877, 880 (Fla. 3d

DCA 2016). To that end, “[t]he failure to define a term involving coverage

does not necessarily render the term ambiguous.” Barcelona Hotel, LLC v.

Nova Cas. Co., 57 So. 3d 228, 230 (Fla. 3d DCA 2011); accord Swire Pac.

Holdings, Inc., 845 So. 2d at 166. When a term or provision is undefined in

the policy, its plain, everyday usage is applied. Heritage Prop. & Cas. Ins.

Co. v. Condo. Ass’n of Gateway House Apts. Inc., 46 Fla. L. Weekly D1867,

D1868 (Fla. 3d DCA Aug. 18, 2021) (stating “well-established principle that

‘[w]hen a policy provision remains undefined, common everyday usage

determines its meaning’” (quoting Sec. Ins. Co. of Hartford v. Com. Credit

Equip. Corp., 399 So. 2d 31, 34 (Fla. 3d DCA 1981))); see also State Farm

Fire & Cas. Co. v. Castillo, 829 So. 2d 242, 244 (Fla. 3d DCA 2002) (“[T]erms

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utilized in an insurance policy should be given their plain and unambiguous

meaning as understood by the ‘man-on-the-street.’”).

It is firmly established that “[i]n interpreting ‘insurance policies, courts

should read each policy as a whole, endeavoring to give every provision its

full meaning and operative effect.’” City of Florida City v. Pub. Risk Mgmt. of

Fla., 307 So. 3d 135, 138 (Fla. 3d DCA 2020) (quoting Anderson, 756 So.

2d at 34); see also State Farm Fire & Cas. Co. v. CTC Dev. Corp., 720 So.

2d 1072, 1075 (Fla. 1998) (“[P]rinciples governing the construction of

insurance contracts dictate that ‘[w]hen construing an insurance policy to

determine coverage the pertinent provisions should be read in pari materia.’”

(quoting Nationwide Mut. Fire Ins. Co. v. Olah, 662 So. 2d 980, 982 (Fla. 2d

DCA 1995))). Moreover, “[a]ll the various provisions of a contract must be

so construed, if it can reasonably be done, as to give effect to each.” Univ.

of Miami v. Frank, 920 So. 2d 81, 87 (Fla. 3d DCA 2006) (quoting Paddock

v. Bay Concrete Indus., Inc., 154 So. 2d 313, 315 (Fla. 2d DCA 1963)).

Here, the Policy does not cover claims for business income losses

unless those losses arise from a suspension of operations “caused by direct

physical loss of or damage to property.” The parties’ dispute, therefore,

comes down to the meaning of that qualifying phrase, which is undefined in

the Policy. GreenStreet primarily advances two arguments in support of its

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position that economic losses caused by the loss of intended use of its

business property, without accompanying actual, tangible alteration to the

property, triggers coverage under the Policy. First, GreenStreet asserts that

the trial court failed to consider the ordinary, dictionary definitions of the

terms used in the qualifying phrase. Second, GreenStreet argues that the

First District Court of Appeal’s decision in Azalea, Ltd. v. American States

Insurance Co., 656 So. 2d 600 (Fla. 1st DCA 1995), controls here and

mandates the conclusion that the inability to use insured property for its

intended use constitutes a direct physical loss of property. Applying the

above principles, as well as decisions from this Court addressing materially

similar language to the phrase at issue, we find that neither of GreenStreet’s

arguments has merit.

Turning to the text of the relevant phrase, GreenStreet argues that

under its plain terms, “physical loss of or damage to property” can occur

absent “structural alteration” of the insured property. GreenStreet asserts

that in determining the meaning of the phrase, the trial court failed to consult

legal and non-legal dictionaries. It is true that “the first step towards

discerning the plain meaning of [a term undefined by an insurance policy] is

to ‘consult references [that are] commonly relied upon to supply the accepted

meaning of [the] words.’” Arguelles v. Citizens Prop. Ins. Corp., 278 So. 3d

10

108, 111 (Fla. 3d DCA 2019) (quoting Penzer v. Transp. Ins. Co., 29 So. 3d

1000, 1005 (Fla. 2010)); Barcelona Hotel, LLC, 57 So. 3d at 231. Even so,

GreenStreet’s argument fails.

Because the Merriam-Webster dictionary defines “loss” as “losing

possession and deprivation,” GreenStreet asks that we look, in turn, to the

definition of “deprivation”: “the state of being kept from possessing, enjoying,

or using something.” Deprivation, Merriam-Webster’s Online Dictionary,

https://merriam-webster.com/dictionary/deprivation/ def. 1. But the use of

“deprivation” as a synonym for “loss” does not address fact that the phrase

still requires “physical” loss, and GreenStreet’s interpretation of “physical” is

incomplete. See Santo’s Italian Café, LLC v. Acuity Ins. Co., 15 F.4th 398,

404 (6th Cir. 2021) (“Santo’s Café adds that ‘loss’ is a synonym for

‘deprivation’ and that it was deprived of its ability to use the premises for its

intended purpose. . . . But this argument skates over the unrelenting

imperative that the policy covers only ‘physical’ losses.”). GreenStreet

claims that “physical” merely means that a loss is not imagined. Physical,

however, means “of or relating to matter or the material world; natural;

tangible, concrete.” See Physical, Oxford English Dictionary Online (3d ed.

2006), https://www.oed.com/, def. 6; see also Physical, Black’s Law

Dictionary (11th ed. 2019) (“1. Of, relating to, or involving the material

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universe and its phenomena; relating to the physical sciences. 2. Of, relating

to, or involving material things; pertaining to real, tangible objects.”). Thus,

because the ordinary meaning of “physical” carries a tangible aspect, “direct

physical loss” requires some actual alteration to the insured property.

Indeed, we held as much in Homeowners Choice Property & Casualty

v. Maspons, 211 So. 3d 1067 (Fla. 3d DCA 2017), where we considered a

materially similar phrase. In Maspons, the homeowners’ insurance policy

provided that it insured “against risk of direct loss to property described in

Coverages A and B only if that loss is a physical loss to property.” Id. at

1069. The homeowners sought coverage under an ensuing loss provision

for the cost of tearing up and replacing the foundation above a broken pipe.

Id. In reversing summary judgment in favor of the homeowners because the

slab had not been opened and therefore ensuing loss could not yet be

determined, this Court concluded that given the dictionary definition of “loss,”

the broken pipe constituted a direct and physical loss to the property. Id. “A

‘loss’ is the diminution of value of something, and in this case, the ‘something’

is the insureds’ house or personal property. Loss, Black’s Law Dictionary

(10th ed. 2014). ‘Direct’ and ‘physical’ modify loss and impose the

requirement that the damage be actual.” Id. This Court reiterated that a

direct physical loss means that the property was “actually damaged” in

12

Vazquez v. Citizens Property Insurance Corp., 304 So. 3d 1280, 1284-85

(Fla. 3d DCA 2020) (finding trial court’s determination that insured loss was

“the property that was actually damaged” was consistent with policy’s plain

language providing coverage for “direct loss to property . . . only if that loss

is a physical loss to property”); see also Mama Jo’s, Inc. v. Sparta Ins. Co.,

823 F. App’x 868, 879 (11th Cir. 2020), cert. denied, 141 S. Ct. 1737 (2021)

(relying on Maspons and Vazquez to affirm district court’s conclusion that

restaurant did not suffer a “direct physical loss” triggering coverage where

restaurant was inundated with dust and debris from nearby road construction

which required only cleaning and painting of property). Actual damage has

a tangible aspect—it exits in fact. Given the tangible aspects of a physical

loss, GreenStreet’s reliance on a truncated definition of “physical” to prove

coverage under the plain language of the Policy fails. As Chief Judge Sutton

succinctly wrote, in addressing the same phrase in an Ohio insurance policy:

Whether one sticks with the terms themselves

(a “direct physical loss of” property) or a thesaurus-

rich paraphrase of them (an “immediate” “tangible”

“deprivation” of property), the conclusion is the same.

The policy does not cover this loss. The restaurant

has not been tangibly destroyed, whether in part or

in full. And the owner has not been tangibly or

concretely deprived of any of it. It still owns the

restaurant and everything inside the space. And it

can still put every square foot of the premises to use,

even if not for in-person dining use.

13

Santo’s Italian Cafe LLC, 15 F.4th at 401.

GreenStreet argues that interpreting the Policy in this manner violates

the contextual cannon that a contract should not be interpreted to render

words redundant. Put differently, GreenStreet argues that the Llyod’s

conflates the terms “loss of” and “damage to,” which are set forth in the

disjunctive in the phrase “physical loss of or damage to property.” But the

terms are not redundant. Loss can include theft or complete ruin, while

damage is considered a lesser harm to the property. In other words, “loss

of” and “damage to” are degrees of harm, which in all events must be

physical in order for there to be coverage. See, e.g., Santo’s Italian Cafe

LLC, 15 F.4th at 404 (“There is no need to read ‘physical loss’ to include a

deprivation of some particular use of a property in order to give the phrase

independent meaning. That possibility could occur whenever a policy holder

is deprived of property without any damage to it, say a portable grill or a

delivery truck stolen without a scratch.”); Michael Cetta, Inc. v. Admiral

Indem. Co., 506 F. Supp. 3d 168, 180 (S.D.N.Y. 2020) (“[T]he term ‘loss’

would seem to include ‘theft or misplacement,’ which would not constitute

damage to the property. Further, ‘loss’ would extend to the complete

destruction of property, whereas ‘damage’ contemplates a lesser injury.”

(citation omitted)). Because “loss of” can reasonably be interpreted to cover

14

different scenarios than “damage to,” the surplusage cannon is not violated.

See Antonin Scalia & Brian A. Garner, Reading Law: The Interpretation of

Legal Texts 176 (2012) (“If a provision is susceptible of (1) a meaning that

gives it an effect already achieved by another provision, or that deprives

another provision of all independent effect, and (2) another meaning that

leaves both provisions with some independent operation, the latter should

be preferred.”).

GreenStreet further argues that the only binding case on the issue is

Azalea, Ltd., 656 So. 2d at 600, which it asserts stands for the rule that

physical loss occurs when the property no longer serves its function, even

though there has been no “permanent structural alteration of property.”

GreenStreet misreads Azalea Ltd. In that case, a mobile home park insured

its sewage treatment building under a policy providing coverage for “direct

physical loss of or damage to Covered Property.” Id. An unknown substance

was dumped into the treatment facility. Id. at 601. The chemical residue from

the dumped substance adhered to the treatment facility, destroying the

bacteria colony, which was “an integral part of the sewage treatment facility”

and “specifically attached to and [a] part of the treatment facility structure.”

Id. at 601-02. “The facility could not operate or exist unless this colony was

replaced.” Id. at 602. The First District reversed the trial court’s coverage

15

denial, rejecting the insurer’s argument that “there was no actual harm” to

the premises. Id. Specifically, the First District concluded that “there was

direct damage to the structure” because “[t]he residue from the dumped

substance actually covered and adhered to the interior of the structure

causing destruction of the bacteria colony which was an integral part of the

covered facility.” Id. Thus, in Azalea, Ltd., there was actual, tangible

damage to the property, and the case does not assist GreenStreet.

Reading the phrase “direct physical loss of or damage to” in the context

of the entirety of the Business Income (and Extra Expense) Coverage Form

further supports our conclusion that loss of intended use alone, without

tangible alteration to the property, is not sufficient to trigger coverage under

the plain language of the Policy. The coverage for business income states

that Lloyd’s will pay for actual loss of business income sustained “due to the

necessary ‘suspension’ of your ‘operations’ during the ‘period of restoration.’”

It also provides coverage for extra expenses incurred during the “period of

restoration.” The Policy, in turn, defines “period of restoration” as beginning

seventy-two hours after the time of “direct physical loss or damage” and

ending on the earlier of “[t]he date when the property at the described

premises should be repaired, rebuilt or replaced with reasonable speed and

similar quality” or “[t]he date when business is resumed at a new permanent

16

location.” (emphasis added). Thus, the “period of restoration” provision

contemplates physical, tangible alterations to the property that need to be

corrected. See Malaube, LLC v. Greenwich Ins. Co., No. 20-22615-CIV,

2020 WL 5051581, at *9 (S.D. Fla. Aug. 26, 2020) (stating definition for

“restoration period” contemplates physical damage to property and “[t]his

means that, if we construe ‘direct physical loss or damage’ to require actual

harm, it gives effect to the other provisions in the policy. And that is exactly

what Florida law requires us to do so that no section of the insurance policy

is left meaningless.”); see also Oral Surgeons, P.C. v. Cincinnati Ins. Co., 2

F.4th 1141, 1144 (8th Cir. 2021) (“The unambiguous requirement that the

loss or damage be physical in nature accords with the policy’s coverage of

lost business income and incurred extra expense during the ‘period of

restoration.’ . . . That the policy provides coverage until property ‘should be

repaired, rebuilt or replaced’ or until business resumes elsewhere assumes

physical alteration of the property, not mere loss of use.” (emphasis added));

Mudpie, Inc. v. Travelers Cas. Ins. Co. of Am., 15 F.4th 885, 892 (9th Cir.

2021) (considering same definition of “period of restoration” and concluding

that “[t]o interpret the Policy to provide coverage absent physical damage

would render the ‘period of restoration’ clause superfluous”). GreenStreet’s

only argument concerning the “period of restoration” is that it simply

17

addresses the time before normal use of the property can resume. This

argument denies the full meaning and operative effect of the words “repaired,

rebuilt or replaced with . . . similar quality.” See City of Florida City, 307 So.

3d at 138.

Thus, under this Court’s case law and the plain language of the Policy,

loss of intended use alone does not constitute “direct physical loss.” Instead,

“direct physical loss of or damage to property” requires actual, tangible

alteration to the insured property for coverage to be triggered under the

Policy. GreenStreet’s allegation that it suffered economic losses due to the

City of Miami and Miami-Dade County closure orders does not satisfy this

requirement. In this unique circumstance, where the City and County orders

prohibited in-person dining, “[i]t was as if the government temporarily

rezoned all restaurants . . . solely for takeout dining.” Santo’s Italian Café,

LLC, 15 F.4th at 402. And “[t]o the extent [COVID-19] is a physical harm,

such as COVID-19 particles present on surfaces in the restaurant, those can

be easily cleaned.” Town Kitchen LLC v. Certain Underwriters at Lloyd’s,

London, 522 F. Supp. 3d 1216, 1225 (S.D. Fla. 2021); see Mama Jo’s, Inc.,

823 F. App’x at 879 (“[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.’”). In short, the difference “between [GreenStreet’s] loss of use

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theory and something clearly covered—like a hurricane—is that the property

did not change. The world around it did. And for the property to be useable

again, no repair or change can be made to the property—the world must

change.” Town Kitchen LLC, 522 F. Supp. 3d at 1222.

Conclusion

Because the trial court’s finding that the phrase “‘direct physical loss of

or damage to property’ requires some tangible alteration to insured property”

comports with the common meaning of its terms and the context of the Policy

as a whole, the court did not err in its interpretation of the Policy. We

therefore affirm the trial court’s ruling that the economic losses GreenStreet

suffered when it suspended its operations due to the COVID-19 pandemic

does not give rise to coverage under the Policy. 3 The trial court did not err

in dismissing GreenStreet’s petition for declaratory relief and damages with

prejudice.

Affirmed.

3

By our decision we do not mean to say that virus particles could never

result in a tangible alteration to property, only that this is not the case here.

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