St. Petersburg, Florida-based steakhouse Rococo Steak LLC told the circuit court in its Tuesday brief that it has suffered direct physical loss or damage to property caused by the coronavirus and resulting civil closure orders. And Aspen Specialty Insurance Co. has wrongly refused to pay for multiple coverages in the eatery’s “all risk” commercial insurance policy that should apply to those losses, according to Rococo.

Rococo urged the circuit court to reverse the lower court’s Jan. 27 dismissal with prejudice, saying U.S. District Judge Virginia M. Hernandez Covington wrongly tossed the suit based on Aspen’s motion to dismiss for failure to state a claim. The insurer impermissibly asked the judge to decide a factual dispute over whether COVID-19 causes structural alterations to property and ambient air, Rococo argued.

“The district court’s real complaint is not that Rococo Steak has failed to plead structural alteration, but rather that it did not think COVID-19 caused such structural alteration,” Rococo said in its brief. “But, under the Federal Rules of Civil Procedure, the district court is constrained from deciding pled and disputed factual issues on a motion for summary judgment, let alone a motion to dismiss. Ultimately under our legal system, those issues are decided by a jury.”

Rococo took issue with Judge Covington’s citation of an Aug. 18 circuit decision in Mama Jo’s Inc. d/b/a Berries v. Sparta Insurance Co., which affirmed that the insurer did not have to cover a Miami restaurant’s lost income and extra cleaning costs due to dust from nearby roadwork, agreeing with a Florida federal judge that the eatery’s claimed losses did not result from covered “direct physical loss of or damage to” its property.

Judge Covington’s order said Rococo failed to squarely address the binding Mama Jo’s precedent that alleged damage must be actual and physical.

“Like the restaurant in Mama Jo’s, Rococo does not allege that COVID-19 required removal or replacement of any property or items in the insured restaurant,” the judge wrote. “Rather, like the coating of dust and debris in Mama Jo’s, the surfaces allegedly contaminated by COVID-19 seem to only require cleaning to fix.”

But Rococo told the circuit court that Judge Covington and Aspen’s reliance on Mama Jo’s is misplaced when they take the position that there is no direct physical loss to a surface that can be cleaned. And rather than test the sufficiency of the complaint, the district court erred in deciding the case on the merits at the motion to dismiss stage, inappropriately making factual determinations and ignoring Rococo’s claim of losing its ability to function, according to the steakhouse.

“Not only was Mama Jo’s decided in the lower court on a motion for summary judgment … after the parties had the opportunity to conduct discovery and fully develop the factual record supporting their pleadings, but that court was not faced with a contention that loss of functionality was sufficient to constitute direct physical loss or damage,” Rococo argued.

The steakhouse’s initial complaint was lodged on Oct. 23 and alleged the presence of COVID-19, along with loss of functional space, and structural alteration of the restaurant’s surfaces and ambient air caused by the virus. The presence of the virus caused the property to be physically uninhabitable by customers and also caused its function “to be nearly eliminated or destroyed,” according to the brief.

Rococo claimed its October 2019 through October 2020 policy contained coverage for business interruption, extra expenses and civil authority closure orders. The policy contained no virus exclusion and applied to direct physical loss of or damage to covered property, the steakhouse said.

As of now, no Florida appellate court has addressed “direct physical loss of or damage to” property in the context of a coronavirus-related business interruption insurance loss, according to Rococo.

“The absence of appellate authority alone suggests that this case should be allowed to proceed past the pleading stage on this issue,” according to the brief. “Here, Rococo Steak has adequately alleged that COVID-19 and the resulting closure orders caused a loss of function and diminishment of covered property.”

Certification to the Florida Supreme Court is appropriate in Rococo’s case, the steakhouse concluded, saying the Eleventh Circuit would benefit from the state high court’s resolution of whether loss of use or functionality constitutes a “direct physical loss” of covered property, because there is no controlling Florida Supreme Court case on the issue.

Counsel for Rococo and Aspen did not immediately respond Wednesday to requests for comment.

Rococo Steak is represented by Steven H. Osber and Kyle S. Roberts of Conrad & Scherer LLP, and Timothy W. Burns of Burns Bowen Bair LLP.

Aspen Specialty Insurance is represented by Yvette Ostolaza, Chandler Rognes and Virginia Seitz of Sidley Austin LLP, and Patrick Betar and William S. Berk of Berk Merchant & Sims PLC.

The case is Rococo Steak LLC v. Aspen Specialty Insurance Co., case number 21-10672, in the U.S. Court of Appeals for the Eleventh Circuit.