Tapestry, Inc. v. Factory Mut. Insurance

Tapestry, Inc. v. Factory Mutual Insurance Company, Misc. No. 1, September Term, 2022. POLICY INTERPRETATION – ALL-RISK PROPERTY INSURANCE – RISKS OR LOSSES COVERED The United States District Court for the District of Maryland certified a question to the Supreme Court of Maryland.* The Court reformulated the question as follows: When a first-party, all-risk property insurance policy covers “all risks of physical loss or damage” to insured property from any cause unless excluded, is coverage triggered when a toxic, noxious, or hazardous substance—such as Coronavirus or COVID-19—is physically present in the indoor air of that property; is also present on, adheres to, and can later be dislodged from physical items on the property; and causes a loss, either in whole or in part, of the functional use of the property? The Court answered the certified question: No, provided the substance causes neither tangible, concrete, and material harm to the property nor deprivation of possession of the property. *At the time of the certification, the Supreme Court of Maryland was named the Court of Appeals of Maryland.

At the November 8, 2022 general election, the voters of Maryland ratified a constitutional amendment changing the name of the Court of Appeals of Maryland to the Supreme Court of Maryland. The name change took effect on December 14, 2022. United States District Court for the District of Maryland Case No. 1:21-cv-01941-GLR Argued: September 9, 2022 IN THE SUPREME COURT OF MARYLAND* Misc. No. 1 September Term, 2022 ______________________________________ TAPESTRY, INC. v. FACTORY MUTUAL INSURANCE COMPANY ______________________________________ Fader, C.J., Watts, Hotten, Booth, Biran, Gould, Eaves, JJ. ______________________________________ Pursuant to the Maryland Uniform Electronic Legal Materials Act (§§ 10-1601 et seq. of the State Government Article) this Opinion by Fader, C.J. document is authentic. ______________________________________ 2023-06-15 12:13-04:00 Filed: December 15, 2022 Gregory Hilton, Clerk * At the November 8, 2022 general election, the voters of Maryland ratified a constitutional amendment changing the name of the Court of Appeals of Maryland to the Supreme Court of Maryland.

The name change took effect on December 14, 2022. A question certified to us by the United States District Court for the District of Maryland (the “United States District Court”) requires that we explore whether an insurance policy that “covers property . . . against ALL RISKS OF PHYSICAL LOSS OR DAMAGE, except as hereinafter excluded,” and further covers “TIME ELEMENT” losses “directly resulting from physical loss or damage of the type insured,” is triggered by (1) the presence of Coronavirus in the air and on surfaces on the premises of the insured’s retail stores or (2) the resulting loss of functional use of those stores during portions of the COVID-19 pandemic.1 Assuming the truth of the facts pled in the operative complaint about how Coronavirus operates and how it impacted the insured’s properties and operations, as summarized in the United States District Court’s certification order, and based on the provisions of the insurance policies at issue, we will conclude that such allegations do not trigger the primary coverage provided by the policies. There is nothing this Court can say to describe the gravity of the losses inflicted on the world by the COVID-19 pandemic that has not previously been said. We will not try.

It is sufficient for these purposes to note that in addition to the countless other consequences of, and hardships imposed by, the pandemic, many businesses sustained substantial financial losses when they were compelled to close temporarily or alter their operations due to the pandemic and associated governmental orders. 1 “Coronaviruses are a type of virus.” See What is Coronavirus?, Johns Hopkins Med. (July 29, 2022), archived at https://perma.cc/NG7A-GM2L. SARS-CoV-2 is a coronavirus that causes the respiratory disease known as COVID-19. Id.

In this opinion, for ease of reference, we use “Coronavirus” to refer to SARS-CoV-2 and COVID-19 to refer to the resulting disease. One such business is that of Tapestry, Inc., the appellant. Factory Mutual Insurance Company (“FM”), the appellee, issued two first-person, all-risk commercial property insurance policies to Tapestry covering policy periods in which Tapestry’s stores were closed in connection with the COVID-19 pandemic. The primary coverages provided under those policies are triggered by “physical loss or damage” to covered property.

Tapestry submitted claims to FM under the policies for losses exceeding $700 million. After FM denied coverage for the bulk of Tapestry’s claim, Tapestry sued. In the lawsuit, which is now pending in the United States District Court, Tapestry contends that coverage under the policies is triggered because it suffered “physical loss or damage” both by the presence of Coronavirus in its stores and when those stores had to close for business due to the presence of Coronavirus. In response, FM contends that “physical loss or damage” requires structural alteration or permanent dispossession of property, and that Tapestry suffered neither.

Because resolution of that dispute depends on an interpretation of Maryland law we have not previously provided, the United States District Court certified to this Court a question of law, which we have reformulated as follows:2 2 The question as originally drafted by Tapestry and certified to this Court is: When a first-party, all-risk property insurance policy covers “all risks of physical loss or damage” to insured property from any cause unless excluded, is coverage triggered when a toxic, noxious, or hazardous substance—such as Coronavirus or COVID-19—that is physically present in the indoor air of that property damages the property or causes loss, either in whole or in part, of the functional use of the property? Certification Order Certifying a Question of Law to the Maryland Court of Appeals (“Certification Order”) at 1. As phrased, the question seems to presuppose that Coronavirus “damages the property.” However, as reflected in the parties’ briefing and as confirmed by their counsel at oral argument, the intent of the parties—and, they and we 2 When a first-party, all-risk property insurance policy covers “all risks of physical loss or damage” to insured property from any cause unless excluded, is coverage triggered when a toxic, noxious, or hazardous substance—such as Coronavirus or COVID-19—is physically present in the indoor air of that property; is also present on, adheres to, and can later be dislodged from physical items on the property; and causes a loss, either in whole or in part, of the functional use of the property? As we will explain, as applied to the policies at issue, our answer to the certified question is: No, provided the substance causes neither tangible, concrete, and material harm to the property nor deprivation of possession of the property.

BACKGROUND Pursuant to § 12-605(a) of the Courts and Judicial Proceedings Article (2020 Repl.), the United States District Court’s Certification Order contains “[t]he facts relevant to the question, showing fully the nature of the controversy out of which the question arose.” Id. § 12-606(a). In responding to the certified question, “this Court accepts the facts provided by the certifying court.” United Bank v. Buckingham, 472 Md. 407, 413 (2021). The following recitation of facts is drawn from the Certification Order and the three documents attached to and incorporated into it: Tapestry’s operative first amended complaint (the “Complaint”) and the two insurance policies at issue. believe, the United States District Court—is not to presuppose that Coronavirus has caused “physical loss or damage” as that phrase is used in the FM policies. Instead, the intent is to have this Court address whether, under Maryland law, the allegations in Tapestry’s first amended complaint concerning the operation and effect of Coronavirus on its stores and business constitute “physical loss or damage” such as to trigger coverage under FM’s policies.

Our reformulation of the certified question is designed to reflect that. 3 The Parties and the Policies Tapestry owns “modern luxury accessory and lifestyle brands” including Coach, kate spade new york, and Stuart Weitzman. Tapestry operates “over 1,400 stores in the U.S. and internationally, including 15 stores in Maryland.” FM drafted and issued to Tapestry two “all-risk” commercial property insurance policies: (1) Policy No. 1050294, covering policy period April 4, 2019 through April 3, 2020; and (2) Policy No. 1065667, covering policy period April 4, 2020 through April 3, 2021 (collectively, the “Policies”).3 The Policies, which FM wrote using its FM Global Advantage Time Element Select form, “cover[] property, as described in this Policy, against ALL RISKS OF PHYSICAL LOSS OR DAMAGE, except as hereinafter excluded.” The critical phrase “physical loss or damage” is not defined in the Policies. As relevant here, the Policies provide two broad categories of coverage: “Property Damage” and “Time Element.”4 Each category is set forth in a separate section of each Policy that contains, among other things, a broad coverage grant, various exclusions, and various additional coverages. Each Policy provides a maximum overall limit of liability per occurrence of $1 billion, applicable to all coverages, with lower sublimits applicable to specified types of coverage. 3 Each policy technically expires at 12:01 a.m. on April 4 of the year of expiration. 4 The Policies also provide a third category of coverage—“Loss Adjustment and Settlement”—which is not relevant to the present dispute. 4 Property Damage Coverage Provisions The Policies’ primary Property Damage coverage extends to all of Tapestry’s real property and certain personal property, subject to exclusions.

Two of those exclusions are relevant to our analysis. First, each Policy excludes coverage, “unless otherwise stated,” for, among other things, “interruption of business, except to the extent provided by this Policy” and “loss of market or loss of use.” Second, each Policy excludes, “unless directly resulting from other physical damage not excluded by this Policy . . . contamination, and any cost due to contamination including the inability to use or occupy property or any cost of making property safe or suitable for use or occupancy.”5 As relevant here, the Policies define “contamination” as “any condition of property due to the actual or suspected presence of any foreign substance, impurity, . . . toxin, pathogen or pathogenic organism, bacteria, virus, disease causing or illness causing agent[.]” One category of “Additional Coverage” provided in each Policy’s Property Damage section is “Communicable Disease Response” coverage. Under that coverage grant, “[i]f a location owned, leased or rented by the Insured has the actual not suspected presence of communicable disease” that results in a restriction on access to the location, the Policies will “cover[] the reasonable and necessary costs incurred by the Insured at such location[.]” The Policies define “communicable disease” as “disease which is [ ] transmissible from human to human by direct or indirect contact with an affected individual or the individual’s discharges.” 5 Words identified in boldface type in the Policies are defined in each Policy. 5 Time Element Coverage Provisions In each Policy, the primary coverage grant for Time Element losses6 provides that the “Policy insures TIME ELEMENT loss, as provided in the TIME ELEMENT COVERAGES, directly resulting from physical loss or damage of the type insured.”7 The Policies insure such losses only to the extent they are incurred “during the Periods of Liability,” which, for purposes of physical loss or damage to “building[s] and equipment,”8 is the period: a) starting from the time of physical loss or damage of the type insured; and b) ending when with due diligence and dispatch the building and equipment could be: (i) repaired or replaced; and (ii) made ready for operations, 6 In other policies, time element coverage is sometimes referred to as business interruption or business income loss coverage. See, e.g., Uncork & Create LLC v. Cincinnati Ins.

Co., 27 F.4th 926, 932 (4th Cir. 2022) (addressing policy providing “[b]usiness income loss coverage”); Cordish Cos., Inc. v. Affiliated FM Ins. Co., 573 F. Supp. 3d 977 , 987 (D. Md. 2021) (interpreting policy covering “[b]usiness [i]nterruption loss”), aff’d, No. 21-2055, 2022 WL 1114373 (4th Cir. Apr. 14, 2022). 7 Each Policy’s “TIME ELEMENT COVERAGES” provide coverage for (1) at the insured’s option, either gross earnings and extended period of liability or gross profit; (2) extra expense; (3) leasehold interest; and (4) rental insurance. 8 The Policies define the period of liability differently when the physical loss or damage at issue is to other types of property, including “building and equipment under construction,” “stock-in-process and mercantile stock,” “raw materials and supplies,” “water,” “physically damaged exposed films, records, manuscripts and drawings,” and “physically damaged or destroyed property covered under DATA, PROGRAMS OR SOFTWARE.” Here, because Tapestry’s claim relates at least primarily to alleged loss and damage to buildings and equipment—and because the other categories are either clearly inapplicable or also define their ending point by reference to the repair or replacement of the property at issue—we focus on that definition. 6 under the same or equivalent physical and operating conditions that existed prior to the damage. The Time Element coverage section of the Policies includes several “TIME ELEMENT COVERAGE EXTENSIONS” and “ADDITIONAL TIME ELEMENT COVERAGE EXTENSIONS.” One extension in the latter category is the Interruption by Communicable Disease additional coverage extension, which provides that if “a location owned, leased or rented by [Tapestry] has the actual not suspected presence of communicable disease” that results in a restriction on access to the property, the Policies will cover “Actual Loss Sustained and EXTRA EXPENSE incurred by [Tapestry] during the PERIOD OF LIABILITY at such location[.]” The Policies exclude from the Interruption by Communicable Disease coverage extension “loss resulting from” (1) enforcement of a law or ordinance in place before the spread of the communicable disease; and (2) “loss or damage caused by or resulting from terrorism, regardless of any other cause or event[.]” Notably, unlike the primary Time Element coverage, the Interruption by Communicable Disease additional coverage extension is not predicated on the insured property sustaining “physical loss or damage.” Under each Policy, Interruption by Communicable Disease coverage and Communicable Disease Response coverage are together subject to an aggregate sublimit of liability of $1 million per occurrence (as opposed to the Policy limit of $1 billion per occurrence). 7 Coronavirus on Tapestry’s Property The Certification Order contains the following summary of the allegations contained in the Complaint concerning how Coronavirus operates and how it affected Tapestry’s properties and operations: With the support of dozens of peer-reviewed studies, Tapestry alleges in its [Complaint] that Coronavirus/COVID-19 are serious threats rendering objects, surfaces, and areas exposed to them dangerous and fatal. See Ex.

A ¶¶ 26, 30, 162. Coronavirus spreads through indoor spaces via respiratory particles expelled by infected individuals (including those who are asymptomatic or pre-symptomatic). Id. ¶¶ 26-28, 32-33. The presence of Coronavirus in the air, through aerosols or droplets, is the virus’ primary transmission vector.

Id. ¶¶ 40-41, 43-44. Coronavirus, just like ammonia, physically transforms the content of the air and can remain airborne in respiratory particles for indefinite periods. Id. ¶¶ 33, 35-36, 44. Ventilation systems are particularly significant transmission vectors as studies have found Coronavirus in ceiling vent openings, vent exhaust filters, and ventilation ducts up to 180 feet from an infected individual.

Id. ¶¶ 40, 42. As a result, Tapestry alleges that Coronavirus causes the same physical loss or damage to property as that of ammonia, smoke, soot, radon gas, asbestos and other hazardous substances. Id. ¶ 35. Coronavirus particles can also settle on surfaces that themselves become carriers for the disease (“fomites”).

Id. ¶¶ 32, 49, 51, 53, 56. These fomites remain infectious for days after exposure and do not readily dissipate. Id. ¶¶ 31, 51-52, 54-55. Tapestry’s various stores contain materials—like plastics, glass, metals, and fabrics—that have been documented as Coronavirus fomites.

Id. ¶¶ 52 n.57, 59. Even disturbing a fomite—like shaking a contaminated textile such as clothing merchandise— can spread Coronavirus particles and create additional fomites. Id. ¶¶ 52, 59. Indeed, studies have demonstrated that “it is biologically plausible that . . . infectious disease [such as COVlD-l9] can be transmitted directly through contact with [Coronavirus] contaminated textiles.” Id. ¶ 69.

Removing Coronavirus from air is not possible as a practical matter, and no amount of cleaning will prevent reintroduction of the virus when an infected person enters the space—only shutting down the property prevents the repeated and continuous reintroduction of Coronavirus. Id. ¶¶ 63, 76, 78. Coronavirus cannot be removed from indoor air by surface cleaning, which actually causes virus particles to become airborne. Id. ¶¶ 70, 74-75. 8 Attempting to remove Coronavirus from surfaces requires unique protocols such as the use of “harsh chemicals” that are not routinely used and which themselves are alleged to have caused additional physical loss or damage to Tapestry’s stores.

Id. ¶¶ 65-68, 71. Indeed, “Coronavirus is ‘much more resilient to cleaning than other respiratory viruses so tested.’” Id. ¶ 64. Moreover, it is “challenging to accurately determine the efficacy of decontaminating agents and . . . if surface disinfection [is] even effective” given the toxicity of the agents and the microscopic nature of Coronavirus particles. Id. ¶ 66.

Nonetheless, Tapestry asserts that it repaired and remediated its physical space, such as through the removal and disposal of porous materials like clothing, reconfiguring and altering interior spaces of property, and installing physical barriers to create physical distancing. Id. ¶¶ 71-72, 150, 155[,] 227. Tapestry suffered massive losses, in the hundreds of millions of dollars, for extensive and costly health and safety protocols and modifications to its stores. Id. ¶¶ 152, 155, 227. ...

Tapestry alleges that individuals infected with Coronavirus and COVID-19 were present on its insured properties where they spread the virus. Id. ¶¶ 79-80. . . . This supports the allegation that Coronavirus/COVID-19 was present at Tapestry’s stores. Id. ¶¶ 80, 99.

Furthermore, Tapestry alleges that a detailed biostatistical analysis demonstrates that it is statistically certain that customers and other individuals who visited its stores contracted and carried Coronavirus before the stores were closed, and during the time when various stores’ operations were severely restricted. Id. ¶¶ 83-91, 94, 96-101. Due to the presence of Coronavirus/COVID-19 and the effects it had on Tapestry’s stores (particularly the indoor air), Tapestry closed all of its North American stores beginning on March 18, 2020—prior to the issuance of government orders in many counties where Tapestry operates. Id. ¶¶ 56-60, 78, 119, 122, 127-128, 132, 137-38, 142.

This Litigation In responses to notices of claims Tapestry provided under both Policies, FM denied coverage under all coverages except the Communicable Disease Response and Interruption by Communicable Disease coverages, neither of which is predicated on “physical loss or 9 damage” to property. In its denial letters, FM contended that Tapestry could not meet the requirement of other coverages because “the presence of COVID-19 does not cause physical loss or damage.” FM also asserted that coverage was barred by the Contamination Exclusion in the Policies. Tapestry then initiated this lawsuit in the Circuit Court for Baltimore County. FM removed it to the United States District Court.

Tapestry’s Complaint contains two counts. In Count I, Tapestry seeks a declaratory judgment concerning the respective rights and obligations of the parties under the Policies. Specifically, Tapestry seeks declarations “that the Policies cover the losses it had suffered” and “that FM is responsible for fully and timely paying the Tapestry Claim.” In Count II, Tapestry seeks an award of damages and other relief for FM’s alleged breaches of contract in denying coverage under the Policies under all coverages other than the Communicable Disease Response and Interruption by Communicable Disease coverages, which are subject to much lower sublimits of liability than the primary coverages. FM moved to dismiss the Complaint.

With its opposition to that motion, Tapestry filed a motion to certify a question of law to this Court. The United States District Court granted the motion and issued the Certification Order. DISCUSSION Under the Maryland Uniform Certification of Laws Act, Courts and Judicial Proceedings §§ 12-601 – 12-612, this Court “may answer a question of law certified to it by a court of the United States . . . if the answer may be determinative of an issue in pending litigation in the certifying court and there is no controlling appellate decision, constitutional 10 provision, or statute of this State.” Md. Code Ann., Cts. & Jud. Proc. § 12-603 ; see also Md. Rule 8-305. “In responding to a certification from another court, this Court resolves only issues of Maryland law, not questions of fact.” Murphy v. Liberty Mut.

Ins. Co., 478 Md. 333, 367 (2022) . This Court “may go no further than the question certified.” Price v. Murdy, 462 Md. 145, 147 (2018) (quoting AGV Sports Grp., Inc. v. Protus IP Sols., Inc., 417 Md. 386 , 389 n.1 (2010)). The question certified by the United States District Court, as we have reformulated it pursuant to § 12-604, see discussion above at footnote 2, is: When a first-party, all-risk property insurance policy covers “all risks of physical loss or damage” to insured property from any cause unless excluded, is coverage triggered when a toxic, noxious, or hazardous substance—such as Coronavirus or COVID-19—is physically present in the indoor air of that property; is also present on, adheres to, and can later be dislodged from physical items on the property; and causes a loss, either in whole or in part, of the functional use of the property?

Notably, the certified question does not concern either (1) the possibility of coverage under the Communicable Disease Response or Interruption by Communicable Disease coverages of the Policies, or (2) the possible application of the Policies’ Contamination Exclusion. As a result, we will not decide those issues. We will, however, discuss those provisions of the Policies to the extent they aid in our interpretation of the key policy term “physical loss or damage.” THE PHRASE “PHYSICAL LOSS OR DAMAGE” IN THE POLICIES REQUIRES EITHER TANGIBLE, CONCRETE, AND MATERIAL HARM TO THE INSURED PROPERTY OR DEPRIVATION OF POSSESSION OF THE INSURED PROPERTY. Answering the certified question requires us to construe the language of insurance policies, which we do “according to contract principles,” Md. Cas.

Co. v. Blackstone Int’l 11 Ltd., 442 Md. 685, 694 (2015), “under the objective theory of contract interpretation,” Plank v. Cherneski, 469 Md. 548, 617 (2020). Under that approach, unless the language of the contract is ambiguous, we interpret it “based on what a reasonable person in the position of the parties would have understood the language to mean and not ‘the subjective intent of the parties at the time of formation.’” Credible Behav. Health, Inc. v. Johnson, 466 Md. 380, 393 (2019) (quoting Ocean Petroleum, Co. v. Yanek, 416 Md. 74, 86 (2010)); see also JMP Assocs., Inc. v. St. Paul Fire & Marine Ins. Co., 345 Md. 630, 635 (1997) (“The test is what meaning a reasonably prudent layperson would attach to the term.” (quoting Bailer v. Erie Ins.

Exch., 344 Md. 515, 521-22 (1997))). “Thus, ‘the written language embodying the terms of an agreement will govern the rights and liabilities of the parties, irrespective of the intent of the parties at the time they entered into the contract.’” Md. Cas. Co., 442 Md. at 695 (quoting Long v. State, 371 Md. 72, 84 (2002)). “[A] court interpreting an insurance policy is to examine the instrument as a whole, focusing on the character, purpose, and circumstances surrounding the execution of the contract.” Bailer, 344 Md. at 521 ; see also Plank, 469 Md. at 617 (“In interpreting a contract provision, we look to the entire language of the agreement, not merely a portion thereof.” (quoting Nova Rsch., Inc. v. Penske Truck Leasing Co., 405 Md. 435, 448 (2008))). If language in an insurance policy is ambiguous when interpreted according to the principles of contract interpretation set forth above, “we construe that language ‘liberally in favor of the insured and against the insurer as drafter of the instrument.’” Connors v. Gov’t Emps. Ins.

Co., 442 Md. 466, 483 (2015) (quoting Megonnell v. United Servs. Auto. Ass’n, 368 Md. 633, 655 (2002)). A contract “is ambiguous if, ‘when viewed 12 from [a] reasonable person perspective, that language is susceptible to more than one meaning.’” Plank, 469 Md. at 617 (quoting Ocean Petroleum, 416 Md. at 87 ).

However, merely because “a term cannot be precisely defined so as to make clear its application in all varying factual situations does not mean that it is ambiguous.” Allstate Ins. Co. v. Humphrey, 246 Md. 492, 496 (1967). We begin our analysis by focusing on the ordinary meaning of the terms contained in the key phrase on which the answer to the certified question hinges: “physical loss or damage.” We will then expand our focus to the interpretation of that phrase in the broader context of the Policies as a whole. From those sources, we will derive and apply an interpretation of “physical loss or damage” to the allegations of the Complaint.

Finally, we will turn to a review of caselaw from courts interpreting Maryland law and around the country, which we will conclude is overwhelmingly consistent with our own interpretation of “physical loss or damage” and our answer to the certified question. A. Ordinary Meaning “Traditionally, to supply contractual language with its ‘ordinary and accepted meanings[,]’ this Court consults the dictionary definition of such terms.” Credible Behav. Health, 466 Md. at 394 -95 (quoting Pac. Indem.

Co. v. Interstate Fire & Cas. Co., 302 Md. 383, 388 (1985)). The Court looks to dictionary definitions “to identify the common and popular understanding of the words used in the contract as evidence of what a reasonable person in the position of the parties would have understood those terms to mean.” W.F. Gebhardt & Co. v. Am. Eur.

Ins. Co., 250 Md. App. 652, 668 (2021). While dictionaries are useful tools, “simply because [a party] can point to several slightly different 13 dictionary definitions of [a word] does not render that term ambiguous.” Rigby v. Allstate Indem., 225 Md. App. 98, 110 (2015). We begin with the modifier “physical,” which the New Oxford American Dictionary defines, as relevant here, as “of or relating to things perceived through the senses as opposed to the mind; tangible or concrete.” Physical, New Oxford American Dictionary 1321 (3d ed. 2010); see also 11 Oxford English Dictionary 744 (2d ed. 1989) (“[o]f or pertaining to material nature”; and “pertaining to or connected with matter; material; opposed to psychical, mental, spiritual”).

Merriam-Webster defines physical as “having material existence,” “perceptible esp[ecially] through the senses and subject to the laws of nature,” and “of or relating to material things.” Physical, Merriam-Webster’s Collegiate Dictionary 935 (11th ed. 2014). And Black’s Law Dictionary similarly defines physical, as relevant here, as “[o]f, relating to, or involving material things; pertaining to real, tangible objects.” Physical, Black’s Law Dictionary 1386 (11th ed. 2019). Physical thus refers generally to tangible, concrete things that have a material existence and can be perceived by the senses.9 Loss, as relevant here, is defined by the New Oxford American Dictionary as “the fact or process of losing something or someone,” Loss, New Oxford American Dictionary 1033 (3d ed. 2010), and by the Oxford English Dictionary as “[t]he being deprived of, or 9 Accord, e.g., Uncork & Create LLC v. Cincinnati Ins. Co., 27 F.4th 926, 932 (4th Cir. 2022) (“[T]he word ‘physical’ means ‘relating to natural or material things[.]’”); Terry Black’s Barbecue, L.L.C. v. State Auto.

Mut. Ins. Co., 22 F.4th 450 , 455-56 (5th Cir. 2022) (“‘[P]hysical’ means ‘of, relating to, or involving material things; pertaining to real, tangible objects.’” (quoting U.S. Metals, Inc. v. Liberty Mut. Grp., Inc., 490 S.W.3d 20, 24 (Tex. 2015) (in turn quoting Black’s Law Dictionary 1331 (10th ed. 2014)))). 14 the failure to keep (a possession, appurtenance, right, quality, faculty, or the like),” Loss, 9 Oxford English Dictionary 37 (2d ed. 1989).

Merriam-Webster defines loss in relevant part as “destruction, ruin,” “the act of losing possession,” and “a person or thing or an amount that is lost.” Loss, Merriam-Webster’s Collegiate Dictionary 736 (11th ed. 2014). And Black’s Law Dictionary defines the term, again as relevant here, as “[t]he failure to maintain possession of a thing.”10 Loss, Black’s Law Dictionary 1132 (11th ed. 2019). The New Oxford American Dictionary defines damage, as relevant here, as “physical harm caused to something in such a way as to impair its value, usefulness, or normal function.” Damage, New Oxford American Dictionary 436 (3d ed. 2010); see also 4 Oxford English Dictionary 224 (2d ed. 1989) (“Injury, harm; esp[ecially] physical injury to a thing, such as impairs its value or usefulness.”). Similarly, Merriam-Webster defines damage as “loss or harm resulting from injury to person, property, or reputation.” Damage, Merriam- Webster’s Collegiate Dictionary 314 (11th ed. 2014).11 In this context, loss thus refers generally to being deprived of possession of something, whether by its disappearance or destruction; whereas damage refers to harm suffered.12 10 Black’s Law Dictionary and Merriam-Webster’s each also contain definitions specific to insurance that, in this context, would be circular.

See Loss, Merriam-Webster’s Collegiate Dictionary 736 (11th ed. 2014) (“the amount of an insured’s financial detriment by death or damage that the insurer is liable for”); Loss, Black’s Law Dictionary 1132 (11th ed. 2019) (“[t]he amount of financial detriment caused by an insured person’s death or an insured property’s damage, for which the insurer becomes liable”). 11 Black’s Law Dictionary defines “damage” related to the concept of monetary compensation for loss or injury, which is not applicable here. Damage, Black’s Law Dictionary 488 (11th ed. 2019). 12 Accord, e.g., Uncork & Create, 27 F.4th at 932 (“[T]he word ‘damage’ in this context means an ‘injury or harm . . . to property.’” (quoting Webster’s Third New Int’l 15 From their dictionary definitions, we thus glean that “physical loss or damage” to covered property must involve tangible, concrete, and material harm to the property or a deprivation of possession of the property.13 That conclusion supports FM’s position that “physical loss or damage” requires “tangible, physical changes to insured property.” Tapestry argues that the plain meaning of “physical loss or damage” also embraces, in addition to a loss of possession of property, “a functional loss of use of property due to the presence of an external force[.]”14 In doing so, however, Tapestry fails to engage with the common meanings of the relevant terms. Instead, Tapestry merely states its preferred interpretation, claims that “[d]ictionary definitions of the relevant terms . . . demonstrate Dictionary 571 (2002))); Estes v. Cincinnati Ins. Co., 23 F.4th 695, 700 (6th Cir. 2022) (“[T]he word ‘loss’ means ‘destruction’ or ‘deprivation’ (that is, ‘the act of losing possession’).” (quoting Merriam-Webster’s Collegiate Dictionary 736 (11th ed. 2014))); Santo’s Italian Café LLC v. Acuity Ins.

Co., 15 F.4th 398, 402 (6th Cir. 2021) (defining “loss” as “[p]erdition, ruin, destruction; the condition or fact of being ‘lost,’ destroyed, or ruined, or ‘being deprived of’” (quoting Oxford English Dictionary Online (3d ed. 2021))); Indiana Repertory Theatre v. Cincinnati Cas. Co., 180 N.E.3d 403 , 408 (Ind. Ct. App. 2022) (‘“Damage’ is ‘loss due to injury: injury or harm to person, property, or reputation: hurt, harm.’” (quoting Webster's Third Int’l Dictionary 571 (Unabridged ed. 1966))). 13 Accord, e.g., Uncork & Create, 27 F.4th at 932 (“Thus, with reference to a defined premises, the plain understanding of the terms ‘physical loss’ or ‘physical damage’ is material destruction or material harm.”); Estes, 23 F.4th at 700 (“Putting these definitions together, a covered source itself must destroy covered property or deprive the property’s owner of possession.”). 14 Tapestry emphasizes that the Policies’ use of both “loss” and “damage” necessarily implies that they must have different meanings and, therefore, cannot both require physical damage to property. As discussed, we agree that loss and damage, as used in the phrase “physical loss or damage,” embrace different, although partially overlapping, concepts.

For example, a loss may be occasioned by the “destruction” or “ruin” of property, which also constitutes damage, but may also be occasioned by theft, removal, disappearance, or other acts that would not necessarily involve physical damage. But we do not see how that advances Tapestry’s claim that a “physical loss” extends to a temporary loss of functional use of property. 16 this,” and then drops a footnote providing a single definition for each of the three terms. The definitions, all from the Oxford English Dictionary and none offering apparent support for Tapestry’s proposed expansion to “functional loss of use,” are unaccompanied by any analysis or further exposition. Looking only to the ordinary meaning of the terms in isolation, we would be skeptical of Tapestry’s unexplained contention that “physical loss” can embrace a “functional loss of use” for the simple reason that losing a thing is conceptually different than losing the functional use of that thing for a period of time.

Accord Santo’s Italian Café, 15 F.4th at 402 (“A loss of use simply is not the same as a physical loss.”). Although the complete destruction or ruin of property can, indeed, constitute a loss of that property, by permanently depriving the owner of any value in it, the temporary loss of functional use of the same thing is different. See, e.g., Terry Black’s Barbecue, 22 F.4th at 456 (rejecting the contention that a loss of use of property could constitute “direct physical loss” because the relevant policy provision “unambiguously requires a loss of property, not the loss of use of property”). In other words, Tapestry’s proposed addition of the words “functional” and “of use” to arrive at its preferred interpretation of “loss” transforms the concept and gives it a different meaning than that contained in the language of the Policies.

B. Context Expanding our analysis to the context provided by other provisions of the Policies demonstrates the validity of our initial skepticism of Tapestry’s proposed, expansive definition of “physical loss or damage.” Several aspects of the Policies confirm our interpretation of that phrase as not encompassing a functional loss of use of the property. 17 First, the declarations pages of the Policies state that they cover “property . . . against ALL RISKS OF PHYSICAL LOSS OR DAMAGE” not excluded. In the context of property damage coverage, “physical loss or damage” thus “characterizes what effects the covered causes must have on the property to trigger coverage, not the causes themselves.” Verveine Corp. v. Strathmore Ins. Co., 184 N.E.3d 1266 , 1273 (Mass. 2022) (addressing coverage triggered by “direct physical loss of or damage to Covered Property”). The Time Element coverage section then provides coverage for losses incurred by an insured business “directly resulting from physical loss or damage of the type insured.” To be covered, therefore, Time Element loss must be the result of “physical loss or damage” that, in turn, results from a covered (i.e., in an “all risks” policy, not excluded) cause.

If “functional loss of use” could itself constitute “physical loss or damage,” as Tapestry contends, then the Time Element coverage would, in circular effect, provide coverage for losses suffered due to the inability to use property (losses suffered during the period of liability) resulting from the inability to use that property (the functional loss of use of the property). Tapestry’s interpretation is at odds with the very structure of the Policies.15 See GPL Enter. LLC v. Certain Underwriters at Lloyd’s, 254 Md. App. 638 , 659 (2022) (explaining that an insured failed to explain how a Governor’s order prohibiting certain types of operations could 15 As the Massachusetts Supreme Judicial Court explained in Verveine Corp., the fact that policy language like “physical loss or damage” describes both the effect required to trigger property damage coverage and the cause of loss for purposes of time element coverage does not undermine the requirement that the insured’s property first suffer the effect of “physical loss or damage” to trigger coverage under the policy in the first place. 184 N.E.3d at 1274; see also Santo’s Italian Café, 15 F.4th at 402 (identifying “[t]he imperative of a ‘direct physical loss’ or ‘direct physical damage’” as “the North Star of this property insurance policy from start to finish”). 18 constitute both a “direct physical loss” under an all-risk property insurance policy and the interruption of business resulting from such a loss). Second, under the Time Element coverage, the Period of Liability for damage to building and equipment extends from “the time of physical loss or damage of the type insured” to the time when “the building and equipment could be [] repaired or replaced; and [] made ready for operations.” Those concepts make sense under our interpretation of “physical loss”—subject to remedy by replacement—and “physical . . . damage”—subject to remedy by repair or replacement.16 They do not make sense under Tapestry’s definition in that a temporary, functional loss of use of property, without more, is remedied by regaining functional use of the property, not by repair or replacement.17 Accord Terry Black’s Barbecue, 22 F.4th at 456 (“This period [of liability] necessarily contemplates a tangible alteration to the property that requires repair, rebuilding, or replacement.”); Cordish Cos., 573 F. Supp. 3d at 998-99 (“The idea that the property may be ‘repaired or 16 As stated in the Certification Order, “Tapestry asserts that it repaired and remediated its physical space, such as through the removal and disposal of porous materials like clothing, reconfiguring and altering interior spaces of property, and installing physical barriers to create physical distancing.” However, the measures Tapestry