United States Court of Appeals For the First Circuit

No. 23-1286

LAWRENCE GENERAL HOSPITAL,

Plaintiff, Appellant,

v.

CONTINENTAL CASUALTY COMPANY,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Nathaniel M. Gorton, U.S. District Judge]

Before

Gelpí, Howard, and Rikelman, Circuit Judges.

Roman Martinez, with whom Robert J. Gilbert, Michael Huggins, David A. Barrett, Margaret A. Upshaw, and Latham & Watkins LLP were on brief, for appellant.

Kannon K. Shanmugam, with whom H. Christopher Boehning, Matthew M. Higgins, Brian M. Lipshutz, Kenneth N. Thayer, Paul, Weiss, Rifkind, Wharton & Garrison LLP, and Conn Kavanaugh Rosenthal Peisch & Ford, LLP were on brief, for appellee.

January 10, 2024 RIKELMAN, Circuit Judge. Lawrence General Hospital

("LGH") sued its insurer, Continental Casualty Company, for

denying coverage for losses LGH alleges it suffered during the

COVID-19 pandemic. Relying on recent decisions rejecting similar

claims, the district court granted Continental's motion to dismiss

LGH's complaint under Federal Rule of Civil Procedure 12(b)(6).

On appeal, LGH contends that the district court misconstrued the

critical case law and that the detailed allegations in its

complaint are sufficient to state a claim for two different types

of coverage under its policy. First, LGH argues that the policy

provisions covering "direct physical loss of or damage to

property," associated business-interruption losses, and related

expenses should apply because the SARS-CoV-2 virus chemically

bonded with its property, resulting in physical damage. Second,

LGH contends its separately purchased Health Care Endorsement

covers losses and costs incurred as a result of complying with

government decontamination orders related to COVID-19. Applying

Massachusetts state law, we find that LGH failed to state a claim

that the SARS-CoV-2 virus caused "direct physical loss of or damage

to [its] property." However, because we conclude that LGH was

subject to decontamination orders and thus states a claim for

coverage under the Health Care Endorsement, we affirm in part,

reverse in part, and remand for further proceedings.

- 2 - I. BACKGROUND

A. Relevant Facts

We "draw the facts from the complaint and its

attachments," taking the well-pleaded facts as true and construing

all reasonable inferences in LGH's favor. Lanza v. Fin. Indus.

Regul. Auth.,

, 161 (1st Cir. 2020); Barchock v. CVS

Health Corp.,

(1st Cir. 2018).

1. LGH's Insurance Policy

LGH is a nonprofit community hospital operating in

northeastern Massachusetts and southern New Hampshire. It has its

main campus at the eponymous Lawrence General Hospital in Lawrence,

Massachusetts but also operates various other ambulatory surgery

centers, family health centers, outpatient rehabilitation centers,

and laboratories in the region. LGH purchased an "all risk"

commercial property insurance policy ("the policy") from

Continental for the period of October 1, 2019, through October 1,

2020. The policy includes two types of coverage at issue in this

appeal.

First, the policy provides broad coverage for "direct

physical loss of or damage to property." This coverage includes

the value of the lost or damaged property itself, as well as

related losses. The "Business Interruption" provision insures

against "loss resulting from [the] necessary interruption of [the]

business caused by direct physical loss of or damage to covered

- 3 - property" during the time necessary to "rebuild, repair or replace"

the property. The "Extra Expense" provision covers "the reasonable

and necessary extra expense . . . incurred by the Insured in order

to continue as nearly as practicable the normal operation of the

Insured's business following direct physical loss of or damage to

covered property by perils(s) [sic] insured against." The policy

provides primary coverage of up to $563 million for "direct

physical loss of or damage to covered property."

Second, LGH purchased an additional Health Care

Endorsement, which includes "Disease Contamination Coverage."

This coverage is triggered by an "evacuation or decontamination

order at a [covered] location by the National Center [sic] for

Disease Control, authorized public health official or governmental

authority because of the discovery or suspicion of a communicable

disease or the threat of the spread of a communicable disease."

(Emphasis omitted.) Continental will pay for "direct physical

loss of or damage to covered property," a variety of "necessary

and reasonable costs," and lost business income "due to the

evacuation and decontamination order." Under the Health Care

Endorsement, the policy provides coverage of up to $1 million per

occurrence. LGH alleges that it was subject to many occurrences

triggering coverage under the endorsement.

- 4 - 2. The COVID-19 Pandemic and LGH's Response

During early 2020, in the middle of the policy period,

the SARS-CoV-2 virus spread throughout the United States, leading

quickly to tens of thousands of cases of COVID-19.1 The city of

Lawrence experienced some of the highest rates of COVID-19

infection in the Commonwealth, and LGH served as the main COVID-

19 treatment facility in the region.

In its complaint, LGH alleges that it suffered physical

loss of and damage to its property due to the "continuous

reintroduction" of SARS-CoV-2 particles. Relying on expert

testimony, LGH alleges that through a process called "adsorption"

SARS-CoV-2 particles create "an actual [noncovalent] chemical

bond" with the surface of the objects they land on, causing

structural changes to the objects themselves and making the virus

"hard to detach." LGH distinguishes between SARS-CoV-2 particles

that are merely "deposited" on an object, "akin to spilled flour,"

and adsorbed particles which "adhere[] to the surface of the

adsorbing object and concentrate[] there."

However, LGH also alleges that the nature of the bond

between SARS-CoV-2 particles and physical objects "varies, often

markedly so, depending on the type of object." For example, LGH

Like the parties, we distinguish between the disease, COVID- 1

19, and the virus that causes it, SARS-CoV-2.

- 5 - contends that "the properties of the host surface can affect

whether an adhered (deposited, adsorbed, or somewhere in between)

viral particle remains stuck to the surface and, if so, whether it

retains its infectivity." As for the bond's duration, LGH alleges

that some studies have found the SARS-CoV-2 virus remains

infectious for seven days on surfaces such as plastic, stainless

steel, glass, and wood; other studies have found SARS-CoV-2 may

remain infectious on glass and stainless steel for approximately

a month under indoor conditions.

As a result of this contamination, LGH alleges that it

was forced to undertake a series of remediation efforts including:

"enhanced cleaning" using "stronger (and more expensive and time-

consuming) cleaning products and techniques"; extensive testing,

cleaning, and maintenance of HVAC systems, including replacement

of HEPA filters; and sterilization or disposal of items such as

"intravenous therapy (IV) poles, medical gas, linens, toilet

paper, and food."

3. Alleged Decontamination Orders

Additionally, LGH alleges that it was subject to several

government decontamination orders sufficient to trigger the

Disease Contamination Coverage provision. On March 11, 2020, the

World Health Organization declared the global COVID-19 outbreak a

pandemic. Both the federal government and Massachusetts quickly

- 6 - reacted to the news by each declaring a COVID-19 state of

emergency.

LGH points to directives from the Massachusetts

Department of Public Health (DPH) and Centers for Disease Control

(CDC) as representative examples of COVID-19 decontamination

orders. On March 15, 2020, DPH issued a memorandum requiring

hospitals to postpone or cancel all nonessential, elective

invasive procedures until the state of emergency was lifted.

"[N]onessential, elective invasive procedures" were defined

broadly as "procedures that are scheduled in advance because the

procedure does not involve a medical emergency." On May 18, 2020,

DPH issued an updated memorandum authorizing hospitals to resume

a subset of invasive, elective procedures, including cancer

screenings and organ transplants, if the hospitals both met and

attested to compliance with specific safety standards outlined in

the DPH "Reopen Approach for Acute Care Hospitals guidance." The

Reopen Approach required, for example, that hospitals "have an

established plan for thorough cleaning and disinfection of all

common and procedural areas, including in-between patient

encounters in treatment rooms, which may require hiring

environmental services staff and reducing patient hours to allow

for more frequent cleaning." If a hospital failed to meet the

stated safety standards, the Reopen Approach warned that the

hospital must "promptly suspend provision of non-emergent Phase 1

- 7 - services," including "nonessential, elective invasive" surgical

procedures. DPH also warned it would "monitor and assess

compliance," requiring "remedial action or suspension of [Phase 1]

procedures and services as warranted."

On June 8, 2020, DPH issued a new memorandum authorizing

hospitals to resume "elective, non-urgent procedures and

services," again subject to certain mandatory conditions. These

conditions included compliance with the previously stated safety

standards, as well as "[o]ngoing compliance with CDC requirements

and other public health guidance regarding environmental infection

controls," including "thorough cleaning and disinfection of

[patient] room[s] and equipment." LGH alleges that, by reference,

the June 8 order made mandatory a variety of CDC directives. As

an example, LGH cites the CDC's September 2020 publication

"Guidance for Cleaning and Disinfecting Public Spaces, Workplaces,

Businesses, Schools, and Homes," which included suggestions on

using Environmental Protection Agency-approved cleaning products,

regularly disinfecting high-touch areas, and ensuring the use of

appropriate personal protective equipment when using disinfectants

and chemicals.2

2LGH also cites as mandatory the CDC's June 2021 guidance on ventilation system upgrades. However, this document was issued well after the October 2019-October 2020 policy period, and it is not clear -- nor does LGH explain -- why this guidance would be a

- 8 - B. Procedural History

On April 8, 2020, LGH filed a claim with Continental for

coverage of COVID-19 losses beginning on March 16, 2020. After

Continental denied coverage, LGH sued in Massachusetts Superior

Court, bringing solely Massachusetts state-law claims.

Continental then removed the case on the basis of diversity

jurisdiction under

to the District of

Massachusetts.

Now in federal court, LGH filed an amended complaint to

attempt to satisfy the legal requirements specified in three

recently decided cases: Verveine Corp. v. Strathmore Insurance

Co.,

(Mass. 2022); SAS International, Ltd. v.

General Star Indemnity Co.,

(1st Cir. 2022); and Legal

Sea Foods, LLC v. Strathmore Insurance Co.,

(1st Cir.

2022). Continental moved to dismiss the amended complaint for

failure to state a claim, and on February 24, 2023, the district

court granted the motion to dismiss. LGH timely appealed.

II. STANDARD OF REVIEW

We review de novo a district court's decision to grant

a motion to dismiss under Rule 12(b)(6), reversing the dismissal

only if "the combined allegations, taken as true . . . state a

binding decontamination order under the policy. As such, we do not consider it in our analysis.

- 9 - plausible, not a merely conceivable, case for relief." Lee v.

Conagra Brands, Inc.,

(1st Cir. 2020) (quoting

Sepúlveda-Villarini v. Dep't of Educ. of P.R.,

(1st Cir. 2010)). To determine if the plaintiff's allegations are

plausible, we "separate factual allegations from conclusory ones."

Conformis, Inc. v. Aetna, Inc.,

(1st Cir. 2023)

(quoting Ashcroft v. Iqbal,

(2009)). We then

"accept as true all well-pleaded facts alleged in the complaint

and draw all reasonable inferences therefrom in the pleader's

favor." Lanza, 953 F.3d at 162 (quoting Nystedt v. Nigro,

(1st Cir. 2012)).

III. DISCUSSION

A. Interpreting Insurance Contracts

As this case is in federal court by virtue of diversity

jurisdiction, state law provides the substantive rules of our

decision. See Torres-Ronda v. Nationwide Mut. Ins. Co.,

(1st Cir. 2021); Erie R. Co. v. Tompkins,

(1938). The parties agree that Massachusetts law governs the

policy, so we endeavor to predict how the Commonwealth's highest

court would decide this case, regardless of whether our independent

analysis would suggest a different outcome. See Aubee v. Selene

Fin. LP,

(1st Cir. 2022).

Massachusetts courts construe the language of an

insurance policy as a matter of law, applying many of the usual

- 10 - rules for interpreting contracts. Verveine, 184 N.E.3d at 1272;

Valley Forge Ins. Co. v. Field,

(1st Cir. 2012)

(applying Massachusetts law). That, of course, means beginning

with the "actual language of the polic[y]." Brazas Sporting Arms,

Inc. v. Am. Empire Surplus Lines Ins. Co.,

(1st Cir.

2000) (applying Massachusetts law).

Under Massachusetts law, we interpret "the words of the

policy in their usual and ordinary sense." Verveine, 184 N.E.3d

at 1272 (quoting Citation Ins. Co. v. Gomez,

, 952-

53 (Mass. 1998)). This analysis requires that we determine "the

fair meaning of the language used, as applied to the subject

matter."

(quoting Gordon v. Safety Ins. Co.,

(Mass. 1994)). And that means interpreting the policy "in a

reasonable and practical way, consistent with its language,

background, and purpose." See Gen. Hosp. Corp. v. Esoterix Genetic

Lab'ys, LLC,

, 308 (1st Cir. 2021) (citation omitted)

(applying Massachusetts law). We also consider "what an

objectively reasonable insured, reading the relevant policy

language, would expect to be covered." Verveine, 184 N.E.3d at

1272 (quoting Dorchester Mut. Ins. Co. v. Krusell,

,

738 (Mass. 2020)); Brazas Sporting Arms,

(citation

omitted).

A term or phrase in an insurance policy is ambiguous

only if "it is susceptible of more than one meaning and reasonably

- 11 - intelligent persons [could disagree on] which meaning is the proper

one." Verveine, 184 N.E.3d at 1272 (quoting Dorchester Mut. Ins.,

150 N.E.3d at 738). A court will not find ambiguity merely because

"the parties offer different interpretations of the policy

language," Scottsdale Ins. Co. v. Torres,

(1st

Cir. 2009), or there are "multiple dictionary definitions of a

word." Citation Ins. Co., 688 N.E.2d at 953. If a term or phrase

in an insurance policy is reasonably susceptible of more than one

meaning, it is "strictly construed against the insurer" and in

favor of the insured. Easthampton Congregational Church v. Church

Mut. Ins. Co.,

(1st Cir. 2019) (citing Metro. Prop.

& Cas. Ins. Co. v. Morrison,

(Mass. 2011)).

With these principles in mind, we turn to LGH's policy.

B. "Direct Physical Loss of or Damage to Property"

LGH contends it adequately alleged that SARS-CoV-2

chemically bonded with its property, resulting in physical

alteration that qualifies as direct physical loss or damage under

the policy, and the district court therefore erred in dismissing

this claim. We evaluate LGH's argument under a trio of insurance

cases decided under Massachusetts law interpreting "direct

physical loss of or damage to property" in the context of the

COVID-19 pandemic. See Verveine,

; SAS,

; Legal Sea Foods,

. Based on this precedent, we

conclude that we must affirm the district court.

- 12 - We begin with a discussion of these three critical cases.

In Verveine, Boston-area restaurants challenged the denial of

their commercial insurance claims for lost revenue from the COVID-

19 pandemic and resulting government restrictions. 184 N.E.3d at

1270-71. The policies at issue covered "direct physical loss of

or damage to" the insured premises as well as lost business income

and extra expenses sustained due to suspension of operations

"caused by direct physical loss of or damage to property at [the

insured premises]." Id. at 1273 (emphasis omitted). The

Massachusetts Supreme Judicial Court ("SJC") upheld the dismissal

of the restaurants' complaint under its state equivalent to Federal

Rule 12(b)(6). Id. at 1270.

Most importantly, Verveine held that property does not

sustain physical loss or damage "in the first place unless there

needs to be active repair or remediation measures to correct the

claimed damage or the business must move to a new location." Id.

at 1275 (emphasis added) (citing Sandy Point Dental, P.C. v.

Cincinnati Ins. Co.,

, 333 (7th Cir. 2021)). That is

because "'direct physical loss of or damage to' property requires

some 'distinct, demonstrable, physical alteration of the

property,'"

(quoting 10A Jordan R. Plitt et al., Couch on

Insurance § 148:46 (3d ed. 2016)), and of course property cannot

repair itself. The SJC explained that "saturation, ingraining, or

infiltration of a substance into the materials of a building or

- 13 - persistent pollution of a premises requiring active remediation

efforts is sufficient to constitute 'direct physical loss of or

damage to property.'" Id. at 1276. By contrast, the "[e]vanescent

presence of a harmful airborne substance that will quickly

dissipate on its own, or surface-level contamination that can be

removed by simple cleaning, does not physically alter or affect

property." Id. Applying this standard, the SJC held that the

restaurants' losses from COVID-19 related closures were "not in

any way attributable to a direct physical effect on the plaintiffs'

property that can be described as loss or damage." Id. To the

contrary, the court stated, the restaurants' "continuing ability

to provide takeout and other services" demonstrated that there

were no physical effects on the restaurants' property itself, and

consequently the alleged "presence" of the virus would either

"dissipate on its own" or be removed "by simple cleaning." Id.

Shortly after Verveine was decided, our court applied

its reasoning in two opinions issued on the same day. Both cases

involved an appeal from a Rule 12(b)(6) dismissal for claims

virtually identical to those in Verveine: alleged wrongful denial

of commercial property insurance coverage for losses related to

the COVID-19 pandemic. SAS,

; Legal Sea Foods,

. However, both complaints involved slightly

more detailed allegations than those in Verveine. SAS alleged

that "smaller aerosol droplets carrying SARS-CoV-2 can linger in

- 14 - the air for hours and can be pulled into air circulation systems

and spread to other areas in a building"; "SARS-CoV-2 can linger

on surfaces for up to 28 days, serving as a vehicle for viral

transmission during that timespan"; and that the virus "cannot

simply be removed with disinfectant because it is continually

spread and reintroduced." SAS,

(internal

quotation marks omitted). Legal Sea Foods alleged that the virus

"attach[ed] to surfaces on and within . . . insured property and

[hung] in the air," resulting in "losses attributable to

governmental closure orders and losses due to the actual presence

of the SARS-CoV-2 virus at Legal's restaurants," requiring

"increase[d] frequency of cleaning" at those restaurants. Legal

Sea Foods,

(alterations in original).

Nonetheless, relying on Verveine, we found that the

allegations in both complaints amounted to no more than an

"[e]vanescent presence of a harmful airborne substance that will

quickly dissipate on its own, or surface-level contamination that

c[ould] be removed by simple cleaning." SAS,

(first alteration in original) (citing 184 N.E.3d at 1276); Legal

Sea Foods,

(same). Regarding the spread of SARS-

CoV-2 through the air, we explained that "we do not see a reason

for concluding that the SJC would view Legal's allegations

concerning the virus's circulation and hours-long persistence in

the air as establishing more than '[e]vanescent presence.'" Legal

- 15 - Sea Foods, 36 F.4th at 36. As to the allegations about SARS-CoV-2

contamination lasting "for up to 28 days," we found "no allegation

that the virus cannot 'be removed by simple cleaning.'" SAS,

. In evaluating the alleged remediation efforts, we

explained that the SJC's invocation of the phrase "simple cleaning"

referred to "the intensity of remediation measures that would be

required to remove a droplet." Legal Sea Foods,

.

Given that Legal Sea Foods alleged only "increase[d] frequency of

cleaning," we saw "nothing . . . in Legal's complaint that would

provide a basis for concluding that Verveine can be distinguished

from the case before us on such a basis."

Turning to the arguments here, LGH contends that its

property damage claim is sufficient to survive a Rule 12(b)(6)

motion because the allegations in its complaint are materially

different from those in Verveine, SAS, and Legal Sea Foods. In

particular, LGH alleges that SARS-CoV-2 physically altered the

structure of its property through a process called "adsorption,"

which it argues is sufficient to establish direct physical loss or

damage under Verveine. LGH further contends that the physically

altered property was then unsafe because "[h]umans can become

infected by touching . . . an object to which viral particles have

attached." It notes that, in Verveine, the SJC favorably cited

cases where ammonia, gasoline, and noxious odors constituted

physical loss or damage. See 184 N.E.3d at 1276. According to

- 16 - LGH, in those cases, just like here, the property was unsafe

because of the potential harm to people from being inside it, even

though there was no structural issue with the property itself.

As a result of this newly dangerous property, LGH argues,

it undertook substantial remediation efforts that went beyond

"simple cleaning." Given these efforts and LGH's allegation that

the virus may remain on surfaces for up to a month, it contends

the district court erred by dismissing its claim. In support, LGH

cites our opinions in SAS and Legal Sea Foods, where we suggested

that the presence of a virus on a surface for twenty-eight days

may be too long to be deemed "evanescent" and then focused on the

lack of allegations in those cases of any remediation efforts

beyond "simple cleaning." SAS,

("But, even if the

presence of the virus on a surface for 28 days is too long to be

deemed 'evanescent,' SAS makes no allegation that the virus cannot

'be removed by simple cleaning.'" (citation omitted)); Legal Sea

Foods,

("Even if a period of 28 days is too long to

be 'evanescent,' Legal has not alleged the virus cannot 'be removed

by simple cleaning,' as it alleges only that it has had to

'increase frequency of cleaning' in its restaurants.").

Even accepting all LGH's allegations as true, we

conclude that we must reject its arguments for three reasons.

First, the central holding of Verveine, as applied to this case,

is that property cannot repair itself and thus "direct physical

- 17 - loss of or damage to property" exists only if a party must take

active efforts to repair it. 184 N.E.3d at 1275. We read this to

mean that even "distinct, demonstrable, physical alteration" of

property that will resolve of its own accord, without the aid of

remediation efforts, is not "direct physical loss of or damage to

property" under Massachusetts law. Id. Moreover, we read the

SJC's discussion of "evanescent presence" as an illustration of

its central holding: "direct physical loss of or damage to

property" occurs only when "active remediation measures" to

correct the claimed damage are necessary. Id. at 1276. Both

"evanescent presence" and its inverse, "saturation, ingraining, or

infiltration of a substance" into property, serve as

demonstrations of this holding, not as a separate test of "direct

physical loss or damage." Id. Nothing in our opinions in SAS and

Legal Sea Foods suggests otherwise.

Taking as true LGH's allegation that SARS-CoV-2

particles can physically alter the affected property through

adsorption, LGH's complaint still makes clear that, absent any

intervention by it whatsoever, SARS-CoV-2 particles dissipate or

become noninfectious within as little as seven to twenty-eight

days. Any "damage" that can fix itself without further

intervention, and certainly within a period as short as twenty-

eight days or less, cannot amount to "direct physical loss of or

damage to property" under Massachusetts law as explained in

- 18 - Verveine. Therefore, even if LGH did undertake remediation efforts

that amounted to more than "simple cleaning," those efforts were

not to address any "direct physical loss of or damage to property."

Second, this case is distinguishable from the cases

discussed by the SJC about ammonia release, persistent odor, or

gasoline contamination where "direct physical loss of or damage to

property" was found. See Verveine, 184 N.E.3d at 1276 (first

citing Gregory Packaging, Inc. v. Travelers Prop. Cas. Co. of Am.,

No. 2:12–cv–04418,

, at *1 (D.N.J. Nov. 25, 2014)

(ammonia release requiring outside remediation company to reduce

levels in building low enough for safe occupancy inflicted direct

physical loss or damage); then citing W. Fire Ins. Co. v. First

Presbyterian Church,

(Colo. 1968) (gasoline-

infiltrated soil and vapors contaminated foundation, halls, and

rooms); and then citing Farmers Ins. Co. of Ore. v. Trutanich,

(Or. Ct. App. 1993) (persistent odor in

residence from methamphetamine production constituted physical

damage, and therefore cost of remediation was recoverable)). Here,

the allegations demonstrate that LGH undertook its remediation

efforts not to address physical damage to the property, but to

prevent the spread of COVID-19 among people present in the

hospital.

Although LGH argues that these cases represent examples

where the property was unsafe as a result of its potential harm to

- 19 - humans, even though it remained structurally sound, a close review

shows why the SJC concluded these cases did not help the plaintiffs

in Verveine and why they also do not help LGH. In Gregory

Packaging, the local fire department instituted a mile-radius

evacuation zone around the affected property and did not allow the

insureds to reenter the building until it was satisfied that the

remediation company reduced the ammonia gas to "a safe level for

occupancy."

at *1, *2-4. Similarly, in Western

Fire Insurance Co., the insureds evacuated at the behest of the

local fire department, which determined that "the infiltration of

gasoline in the soil under and around the building" rendered the

building "uninhabitable" and use of the building "dangerous."

. There are no similar facts alleged here.3 Instead,

many of LGH's covered properties remained open for some uses, a

fact that, per the SJC, indicates "there were not physical effects

on the property itself." Verveine, 184 N.E.3d at 1276.

Additionally, these cases are characterized by the

uninhabitability of the premises due to pollution or persistent

3 LGH alleges that two of its medical facilities were closed by government order from early March 2020 until May 11, 2020, and August 18, 2020, respectively. These closures were not a result of SARS-CoV-2 rendering the buildings uninhabitable, however, but instead the result of Massachusetts' policy on elective procedures. See Verveine, 184 N.E.3d at 1276 ("COVID-19 orders standing alone cannot possibly constitute 'direct physical loss of or damage to' property.").

- 20 - odor emanating from the building itself, including its walls and

foundation, not due to an infectious disease carried by people

within the building. Given that "[commercial insurance] policies

insure property, not people," it is understandable that an "all

risk" policy would cover pollution arising from the covered

property itself, not the people within it. See Schleicher &

Stebbins Hotels, LLC v. Starr Surplus Lines Ins. Co.,

,

77 (N.H. 2023).

Third, as the SJC did at the time it decided Verveine,

we consider the clear consensus of courts throughout the country,

which cuts against LGH and demonstrates the flaws in its argument.

See Or. Clinic, PC v. Fireman's Fund Ins. Co.,

, 1071

n.1 (9th Cir. 2023) (noting that "as of May 25, 2023, 819 suits

raising similar claims . . . have been dismissed with prejudice by

federal and state courts"). For example, the New Hampshire Supreme

Court recently held that the dissipation of SARS-CoV-2 within a

month is essential to the determination that it does not cause

direct physical loss or damage. See Schleicher & Stebbins Hotels,

302 A.3d at 78. As the court aptly stated:

Accepting for the purposes of this appeal that . . . the virus can linger on surfaces for as long as 28 days, the fact that the virus will eventually dissipate on its own is significant to the question of whether the property has been changed in a distinct and demonstrable way. Property that has been changed in a distinct and demonstrable way

- 21 - will not be changed back simply by the passage of time.

Id. Similarly, as the Nevada Supreme Court explained, "[p]resence

of a physical virus on the property, even if it 'attaches to' the

property, does not give rise to the necessary transformative

element of something like 'fire, water, or smoke.' Otherwise, the

alleged presence of a physical force would 'render[] every sneeze,

cough, or even exhale' a qualifying harm." Starr Surplus Lines

Ins. Co. v. Eighth Jud. Dist. Ct. in & for Cnty. of Clark,

, 264 (Nev. 2023) (citations omitted).

The logic in these opinions echoes the SJC's explanation

in Verveine that "the question is not whether the virus is

physical, but rather if it has direct physical effect on property

that can be fairly characterized as 'loss or damage.'" 184 N.E.3d

at 1275. And as multiple courts have found, such direct physical

effect on property does not occur with SARS-CoV-2, where "the

problem of COVID-19 and its associated health risks are entirely

dependent on people being present at the property, rather than

arising from any harm to or defect in the property itself." Eighth

Jud. Dist. Ct., 535 P.3d at 266. Thus, we conclude that the SJC

would find no coverage under the physical property damage provision

here, despite the detailed allegations in LGH's amended complaint.

We address one final point on this issue. We disagree

with LGH that ruling that a virus or disease cannot cause physical

- 22 - loss or damage under the policy is irreconcilable with the policy's

Disease Contamination Coverage provision. This provision states:

If as a result of an evacuation or decontamination order at a location by the National Center [sic] for Disease Control, authorized public health official or governmental authority because of the discovery or suspicion of a communicable disease or the threat of the spread of a communicable disease, the Insurer will pay for: (1) direct physical loss of or damage to covered property . . . .

(First emphasis added.) The plain text of the policy clearly

contemplates coverage for a direct physical loss of or damage to

property "as a result of an evacuation or decontamination order,"

not from the communicable disease itself.

In sum, we conclude that the district court did not err

in finding LGH failed to allege "direct physical loss of or damage

to" its covered property. The allegations, taken as true,

demonstrate only a risk to people from the virus, not tangible

damage to LGH's physical property requiring remediation. Our

conclusion here reflects not only our understanding of

Massachusetts law, but also the clear consensus of courts across

the country.

C. Disease Contamination Coverage Provision

LGH next argues that the district court erred in

dismissing its claim under the Disease Contamination Coverage

provision. On this issue, we agree with LGH.

- 23 - This provision covers losses or costs incurred when four

criteria are met: (1) LGH is subject to "an evacuation or

decontamination order"; (2) "at a [covered] location"; (3) issued

"by the National Center [sic] for Disease Control, authorized

public health official or governmental authority"; (4) "because

of . . . the threat of the spread of a communicable disease."

(Emphasis omitted.) LGH alleges that it was subject to several

mandatory orders from the Massachusetts DPH and, by reference, the

CDC, which are sufficient to trigger coverage under this provision.

Importantly, on appeal, Continental has not contested

that LGH has met the last three criteria for coverage under this

provision. Instead, Continental focuses on the first factor --

whether LGH was subject to a "decontamination order" -- and argues

that it was not. In Continental's view, the DPH and CDC directives

cited by LGH were not mandatory orders at all. Further,

Continental contends the directives did not require

"decontamination."

The terms "decontamination order," "decontamination,"

and "order" are not defined in the policy, and accordingly we

construe their "fair meaning . . . as applied to the subject

- 24 - matter." Gordon,

(citation omitted). Under

this framework, we reject both of Continental's arguments.4

1. The Directives Were Orders

The "fair meaning" of the term "order" is unambiguous,

and as such we consider whether the directives identified by LGH

are "orders" within that term's "usual and ordinary sense."

Citation Ins. Co., 688 N.E.2d at 952-53 (citation omitted). As

other courts interpreting this term have found, and we agree, an

"order" must be compulsory. See Conn. Child.'s Med. Ctr. v. Cont'l

Cas. Co., No. 22-322,

, at *2 (2d Cir. Apr. 17,

2023) (discussing the lack of "orders that required Plaintiffs-

Appellants to evacuate or decontaminate their properties"

(emphasis added)); PS Bus. Mgmt., L.L.C. v. Fireman's Fund Ins.

Co., No. 21-30723,

, at *4 (5th Cir. July 6, 2022)

(discussing whether "any public health order mandated that

[Plaintiffs'] premises 'be evacuated, decontaminated, or

disinfected'" (emphasis added)). The parties do not dispute this

definition. Rather, they dispute whether the sanctions LGH would

face for its noncompliance with the DPH and CDC directives are

4In a footnote in its brief, Continental also suggests that LGH's claims under the Disease Contamination Coverage provision would be foreclosed by several exclusions. We leave for the district court to decide any issues related to the alleged exclusions given that Continental did not include an argument on this defense in its briefing below or on appeal.

- 25 - severe enough for those directives to be considered "orders." We

hold that they are.

LGH alleges that beginning on March 15, 2020, DPH

directed all Massachusetts hospitals to "postpone or cancel any

nonessential, elective invasive procedures," which were defined as

"procedures that are scheduled in advance because the procedure

does not involve a medical emergency." It further alleges that

beginning on May 18, 2020, it was subject to an updated memorandum

requiring it to comply with specific public health and safety

standards before the hospital was allowed to move forward with

"elective procedures" such as "cancer screenings in high-risk

groups," "prenatal care," "removal of breast malignanc[ies]," and

"organ transplants." The mandatory public health standards

included "cleaning and disinfection of all common and procedural

areas." LGH claims an additional June 2020 memorandum required

its "[o]ngoing compliance" with the prior "public health and safety

guidelines," as well as with "CDC requirements and other public

health guidance regarding environmental infection controls" before

engaging in "non-essential elective invasive procedures and

services." As LGH points out, both the May and June 2020

directives required that it attest to its compliance with the

stated conditions and informed LGH that noncompliance would result

in "remedial action or suspension of [non-essential elective

invasive] procedures and services." According to Continental,

- 26 - however, the directives were not orders because LGH could have

"chosen" to remain open for only non-elective procedures or waited

for DPH to change the requirements for hospitals to resume elective

procedures.

We cannot square Continental's argument with our

obligation to interpret the policy "in a reasonable and practical

way, consistent with its language, background, and purpose." Gen.

Hosp. Corp., 16 F.4th at 308 (citation omitted). LGH's compliance

with the directives was not optional under any practical

understanding of that term. Conducting the type of urgent elective

procedures identified in the directives is important both to LGH's

mission of providing necessary care to its community and to its

bottom line and ability to operate. As LGH convincingly argues,

the "choice" to comply with the stated conditions or forgo the

ability to treat "the vast majority of its patients" for an

indefinite period is no choice at all.

Further, Continental's interpretation would be

inconsistent with the purpose of the policy: insurance coverage so

that LGH could continue to provide medical care to patients.

Following Continental's argument to its logical conclusion, no

evacuation or decontamination directive would ever be mandatory,

because a facility would always have the option of ceasing to

provide all or a subset of medical services instead of complying.

- 27 - The additional coverage LGH purchased with the Health Care

Endorsement would therefore be illusory.

Finally, Continental cites two cases affirming district

court rulings that government decontamination orders were

insufficient to support coverage under similar insurance

provisions interpreted under Connecticut and Louisiana law. See

Conn. Child.'s Med. Ctr.,

, at *2 (applying

Connecticut law and upholding the grant of a motion to dismiss

where the plaintiff-hospital "failed to allege that any specific

government order required them to evacuate or decontaminate their

properties" (emphasis added)); PS Bus. Mgmt., L.L.C.,

, at *4 (applying Louisiana law and upholding the grant of

a motion to dismiss where the plaintiff failed to allege "that any

public health order mandated that their premises 'be evacuated,

decontaminated, or disinfected'"). However, in each of these cases

the plaintiffs failed to describe the specific evacuation or

decontamination orders their property was subject to, instead

referring generally to executive orders and public health

guidance. See Complaint at ¶¶ 45-57, Conn. Child.'s Med. Ctr. v.

Cont'l Cas. Co.,

(D. Conn. 2022) (No. 3:21-

cv-291) (failing to identify the specific orders requiring

decontamination and alleging plaintiff was subject to social

gathering restrictions, "directives and guidance" from the

Connecticut Department of Public Health, and "guidance" from OSHA

- 28 - and the CDC); Notice of Removal, Exhibit B at 3 ¶ 9, PS Bus. Mgmt.

v. Fireman's Fund Ins. Co.,

(E.D. La. Oct. 7, 2021)

(No. 2:21-cv-1229) (alleging only that plaintiff was subject to

"non-essential business[]" closures). These examples are clearly

distinguishable from the specific and detailed allegations in

LGH's amended complaint.

2. The Orders Required Decontamination

The parties also dispute whether the DPH and CDC

directives were "decontamination" orders. Importantly, both LGH

and Continental agree that decontamination involves "remov[ing],"

"eliminat[ing]," or "rid[ding] [a property] of" contamination.

But Continental argues that an insured can never remove, eliminate,

or rid itself of COVID-19 "because it is repeatedly reintroduced

by people." Extending the logic of Continental's argument, the

Disease Contamination Coverage would not apply to COVID-19 at all

and could only be invoked when an insured's efforts lead to near-

permanent decontamination.

At this motion to dismiss stage, viewing LGH's well-pled

allegations in the light most favorable to it, we disagree with

Continental. We begin, of course, with "the actual language of

the polic[y]." Brazas Sporting Arms, Inc.,

; see

also Gen. Hosp. Corp., 16 F.4th at 308. The Disease Contamination

Coverage provision specifically applies to public health orders

issued "because of the discovery or suspicion of a communicable

- 29 - disease or the threat of the spread of a communicable disease."

There is no dispute that COVID-19 is a communicable disease.

Further, Continental has not pointed us to any language in the

policy suggesting that decontamination needs to be near-permanent

to qualify for coverage. Continental's own example of

decontamination, the removal of bacteria that causes Legionnaires'

disease from ventilation equipment, does not on its face foreclose

the possibility that the bacteria could be reintroduced to the

newly cleaned equipment.

Additionally, Continental's argument that the term

"decontamination" means near-permanent decontamination appears at

odds with the purpose of the policy. By Continental's reasoning,

a hospital that could become re-contaminated within the policy

period with a particular bacteria or virus would never be able to

claim coverage under the Disease Contamination Coverage provision.

Yet the very nature of a "communicable disease" implies the

possibility of re-contamination. Thus, the risk that a hospital's

premises could be contaminated multiple times with a particular

bacteria or virus during the outbreak of a communicable disease

appears to be the type of healthcare-specific risk that the policy

was designed to cover. See Brazas Sporting Arms, Inc.,

(requiring, under Massachusetts law, that we "consider 'what

an objectively reasonable insured, reading the relevant policy

language, would expect to be covered.'" (citation omitted)).

- 30 - Finally, we disagree with Continental's argument that

the limited use of the term "decontamination" in the DPH or CDC

directives "proves that decontamination was not the objective" of

those directives. Continental quotes from a section of the CDC

directive that uses the word "decontamination" in suggesting that

extremely elevated temperatures (above 158 degrees Fahrenheit) may

be an effective form of eliminating COVID-19 contamination but

noting such a strategy "is not generally recommended and is not

realistic for occupied spaces." Continental argues that this

discussion indicates the CDC believed COVID-19 decontamination to

be unattainable. This is an overreading of the CDC document. Over

ten pages, the CDC articulates a range of strategies to reduce the

risk of contracting COVID-19 in indoor spaces, including

improvements to ventilation systems and the use of ultraviolet

germicidal irradiation lights. That the CDC counseled against one

decontamination method is not an indication that it believed

decontamination by any method to be impossible.

III. CONCLUSION

For all these reasons, we AFFIRM IN PART, REVERSE IN

PART, and REMAND for further proceedings. The parties shall bear

their own costs.

- 31 -