Iowa Supreme Court and Eighth Circuit Uphold Denials Of Insurance Coverage Arising From COVID-19 Business Closures

In separate opinions, each issued on Friday, April 22, the Iowa Supreme Court and the United States Court of Appeals for the Eighth Circuit held that businesses that closed in spring 2020 to comply with COVID-19 emergency regulations could not obtain coverage under commercial insurance policies that required “direct physical loss of or damage to property.”

In Wakonda Club v. Selective Insurance Company of America, a private golf and country club in Des Moines, the Wakonda Club, made a claim under its all-risk commercial property insurance policy for income it lost during the time it temporarily closed its facilities in compliance with Governor Kim Reynolds’ emergency proclamation closing bars and restaurants at the outset of the COVID-19 pandemic.

The insurance policy at issue covered actual losses of business income as a result of suspension of operations, provided the suspension was caused by “direct physical loss of or damage to property” at the covered premises. The Wakonda Club’s insurer denied coverage under the policy on the grounds that there was no direct physical loss of or damage to the covered property. The Wakonda Club sued in Iowa district court, and the district court granted summary judgment in favor of the insurer...

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