Iowa top court latest to reject insurance coverage for COVID biz losses

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  • Iowa Supreme Court rules against businesses seeking coverage for pandemic losses
  • Comes a day after Massachusetts' top court ruled for insurer

(Reuters) - Iowa's highest court on Friday became the second state supreme court to weigh in on whether businesses can recover losses they suffered due to the COVID-19 pandemic through insurance by ruling that a country club and steakhouse could not.

The Iowa Supreme Court ruled that the inability of Wakonda Club and Jesse's Embers to fully use their premises after the state restricted social gatherings and in-person dining in 2020 did not trigger coverage under their property insurance policies.

Those policies were issued by a unit of Selective Insurance Group Inc in the case of Wakonda Club and Farm Bureau Financial Services in the case of Jesse's Embers.

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The rulings marked the latest in a long line of defeats for businesses nationally who filed hundreds of lawsuits seeking billions of dollars in coverage after states imposed lockdowns and social gathering restrictions to slow the virus's spread.

Most of those rulings were by federal courts interpreting state law. Some businesses have urged state supreme courts, which have the final word on interpreting state laws, to "right a ship which has gone adrift," as Wakonda Club said in a brief.

Both businesses sought coverage after Iowa Governor Kim Reynolds in March 2020 issued a proclamation closing all bars and restaurants from dine-in or in-person service. It later resumed limited, restricted in-person operations in May 2020.

Wakonda Club argued it was entitled to coverage due to the governor's proclamation under an all-risk commercial property insurance policy as it amounted to a "direct physical loss of or damage to property," but Selective denied its claim.

But Justice Dana Oxley, writing for the 7-0 court, agreed Selective was off the hook, saying that Iowa law requires there to be a "physical aspect" to the loss of use of the property to satisfy the requirement of the club's policy.

"Proclamations like the one issued by Governor Reynolds were triggered by attempts to stop the spread of the COVID-19 virus, not because facilities like Wakonda Club were in imminent danger of physical harm that would cause a loss of the property," she wrote.

Similar reasoning applied in Jesse's Embers' case. Douglas Haag, a lawyer for Selective at Patterson Law Firm, in an email said the decision will result in the dismissal of many similar cases in Iowa state and federal courts.

James Carney, a lawyer for the businesses at Carney & Appleby Law Firm, did not respond to a request for comment.

The decision came a day after the Massachusetts Supreme Judicial Court in a similar case ruled that three restaurants' losses likewise did not constitute property losses requiring coverage.

State supreme courts in Ohio, Vermont and Wisconsin, along with the District of Columbia Court of Appeals, have heard arguments in COVID-19 insurance cases but have yet to rule.

The case is Wakonda Club v. Selective Insurance Company of America, Iowa Supreme Court, No. 21–0374.

For Wakonda Club and Jesse's Embers: James Carney of Carney & Appleby Law Firm

For Selective: Douglas Haag of Patterson Law Firm

For Western Agricultural Insurance Company: Karl Olson of Parker & Geadelmann

Read more:

In a first, Massachusetts top court rejects insurance for COVID business losses

Top Ohio court skeptical of insurance coverage for COVID business losses

Society Insurance, restaurants take Covid-19 coverage war to Wisc. high court

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Nate Raymond reports on the federal judiciary and litigation. He can be reached at