UPDATES & ANALYSIS

Iowa Supreme Court to hear arguments in case related to Covid-19 shut-down in special Feb. 21 evening session

by Rox Laird | February 14, 2022

The Iowa Supreme Court will hear oral arguments Feb. 21 in a special evening session in Des Moines to accommodate members of the public who are unable to attend daytime sessions of the Court.

Oral argument will be heard in an appeal by Wakonda Club against its insurer over whether the club’s business-interruption insurance policy provided coverage for losses arising from governor’s March 2020 proclamation ordering Iowa bars and restaurants closed in response to the Covid-19 outbreak. (Go to On Brief’s “Cases in the Pipeline” page to read briefs filed in this appeal.)

The case is Wakonda Club v. Selective Insurance of America. The oral argument is scheduled to begin at 7 p.m. in the Supreme Court courtroom in the Judicial Branch Building at 1111 E. Court Ave. in Des Moines.

The evening session in Des Moines is part of the Supreme Court’s effort to bring the appellate process to the public. This term, the Court has held oral arguments in Oskaloosa and at the University of Iowa Law School. It is tentatively scheduled to hold a session at Drake University Law School in March.

The Wakonda Club appealed a decision by Polk County District Court Judge Celene Gogerty that Wakonda Club’s loss of business as a result of the governor’s proclamation was not covered by its business interruption policy issued by Selective Insurance of America.

Judge Gogerty ruled that Selective’s policy, which covered business losses due to “physical loss or damage,” required that there be “injury to or destruction of the realty.” Because Wakonda did not claim its business loss was due to “injury to or destruction” of its dining facility, the District Court held that Wakonda’s loss was not covered under the policy. The court also held that Wakonda’s claim was barred by Selective policy’s exclusion of coverage for losses or damage “caused by or resulting from any virus, bacterium or other micro-organism that induces or is capable of inducing physical distress, illness or disease.”

In its appeal, Wakonda quotes language from the policy saying it covers loss of business income due to suspension of operations caused by “direct physical loss of or damage to covered property at the described premises.” But Wakonda argues the policy does not define the phrase “direct physical loss of or damage to . . . .” Nor does it define specific terms such as “loss,” “direct,” “physical,” or “damage.”

Moreover, it argues that the use of the word “or” between the terms “physical loss of” and “damage” means that “loss of” is distinct from “damage to” and that either a “loss of” or “damage to” qualifies for coverage.

Wakonda argues it suffered a “physical loss” of its property as a result of the proclamation that deprived Wakonda of its ability to use the facility for in-person dining.

As for the District Court’s holding that coverage of Wakonda’s claim is precluded by a provision in the policy that Selective will not pay for loss or damage caused directly or indirectly by “any virus, bacterium or other microorganism,” Wakonda argues that its insurance claim is based on the closure of its restaurant and bar as required by the governor’s proclamation, not because there was a presence of the virus or virus-infected persons in the club.

A second case raising the same issues of business interruption insurance coverage for losses due to the governor’s Covid-19 proclamation will be submitted to the Court Feb. 22 without oral argument. That case, Jesse’s Embers v. Western Agricultural Insurance Co. dba Farm Bureau Financial Services, is an appeal from Polk County District Court. In that case, Judge Jeanie Vaudt similarly ruled that Jesse’s Embers restaurant’s business interruption policy issued by Farm Bureau did not cover losses during the period of closure under the governor’s proclamation.

Tags: Iowa Supreme Court 2021-2022