Torgerson Properties, Inc. v. Continental Casualty Company

Background

Torgerson Properties, Inc. owned forty hotels, restaurants, and event centers in Minnesota and Florida, including franchises of Best Western, Hilton, Holiday Inn, and Marriott. After Governors Tim Walz and Ron DeSantis ordered business shutdowns in their states because of the coronavirus pandemic, Torgerson sought business-interruption insurance coverage from Continental Casualty Company. Continental denied coverage, leading to the lawsuit.

The dispute concerned whether two parts of Torgerson’s insurance policy covered the shutdown losses. The business-interruption provision covered losses from an interruption caused by “direct physical loss of or damage to” covered property. The civil-authority and access provision covered losses when a government order prohibited access because of qualifying physical loss or damage to property, or when physical loss or damage physically prevented entry or exit.

Court’s analysis

The court evaluated Continental’s Rule 12(b)(6) motion to dismiss. Under that rule, a complaint must allege enough facts to make the requested relief reasonably plausible, and the court generally accepts plausible factual allegations as true at this stage.

Applying Minnesota law, the court treated interpretation of the insurance policy as a legal question. It relied on decisions stating that “direct physical loss or damage” requires actual physical loss or physical harm to the insured property. The court noted that loss of use or function alone does not satisfy that requirement.

Torgerson argued that the case was different because it alleged that the virus contaminated its properties. The court said that, even assuming virus contamination could qualify as direct physical loss, Torgerson had not alleged contamination in its amended complaint. Instead, the complaint alleged that consumers and employees could not be present and that customers had been deprived of access, nearly eliminating or destroying the property’s function and value.

The court also considered statements in Torgerson’s claim documents about employees and a visitor possibly testing positive for the virus. It found those general statements insufficient to establish the type of property contamination that could support coverage. The court distinguished a case involving asbestos contamination, explaining that the shutdowns here resulted from executive orders intended to slow the virus’s spread, rather than from the virus’s presence on the premises.

Disposition

The court concluded that Torgerson had not established that its policy provided coverage for the claims. Judge Paul A. Magnuson granted Continental’s Motion to Dismiss and dismissed the Amended Complaint with prejudice. The order directed that judgment be entered accordingly.