Julio & Sons Company Barteca Restaurants, LLC Uncle Julio's Annapolis Concessions, LLC Uncle Julio's Columbia Concessions, LLC Uncle Julio's Corporation Uncle Julio's of Florida, Inc. v. Continental Casualty Company

AFFIRMED and Opinion Filed July 3, 2024

S In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-23-00116-CV

JULIO & SONS COMPANY, ET AL., Appellants
V.
CONTINENTAL CASUALTY COMPANY, Appellee

On Appeal from the 44th Judicial District Court
Dallas County, Texas
Trial Court Cause No. DC-21-02194

OPINION
Before Justices Nowell, Miskel, and Kennedy
Opinion by Justice Nowell
This case involves an insurance coverage dispute between appellants (two

restaurant groups collectively referred to as UJB) and appellee Continental Casualty

Company. UJB filed a claim under a commercial property insurance policy for

business interruption losses, among others, resulting from the COVID-19 pandemic.

After Continental denied coverage because UJB did not establish any “direct

physical loss of or damage to” their restaurants, UJB filed suit. Continental moved

for summary judgment relying, in part, on Fifth Circuit and other federal circuit

courts’ and state courts’ conclusions that COVID-19 does not cause direct physical
loss of or damage to property as is necessary to trigger insurance overage. The trial

court granted Continental’s motion for summary judgment. UJB challenges the trial

court’s order on numerous grounds. We affirm.

Background

UJB owns Uncle Julio’s, Hacienda Colorado, and Bartaco restaurant chains.

It operates approximately a dozen restaurants in Texas and fifteen restaurants in

other states. UJB purchased an insurance policy (the Policy) from Continental in

2019 that covered any property losses for the October 30, 2019 through October 30,

2020 time period. The Policy broadly covered, among other things, “risks of direct

physical loss of or damage to” any real or personal property, all “time element”

losses for business interruption, losses due to orders of a “civil authority,” and extra

expenses associated with such losses. The Policy provided these coverages “except

as hereafter excluded” but contained no exclusion for viruses.

After COVID-19 was declared a worldwide pandemic in early 2020,

government officials around the country issued business restriction and stay-at-home

orders and encouraged social distancing in an effort to reduce the spread of the

deadly virus. UJB temporarily shut down restaurant operations in some locations

and permanently closed in others. Thereafter, UJB submitted an insurance claim to

Continental seeking coverage under the following provisions: (1) Business

Interruption, (2) Denial of Access by Civil Authority, (3) Ingress-Egress,

(4) Contingent Business Interruption, (5) Extra Expense, (6) Leasehold Interest,

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(7) Expenses Related to Reducing Loss, (8) Extended Period of Indemnity, (9) Loss

Adjustment Expense, and (10) Professional Fees. On June 13, 2020, Continental

denied coverage, in relevant part, because “[y]ou have not claimed that [UJB]’s

operations were suspended because of any direct physical loss of or damage to

property . . . and our investigation has revealed no evidence of such physical loss or

damage.”

On February 19, 2021, UJB filed an original petition requesting declaratory

relief and alleged, in relevant part:

From March 2020 through the present, as a direct result of the COVID-
19 pandemic and related government orders, UJB has suffered, and
continues to suffer, physical loss of and damage to its covered property
and severe “time element” losses and other covered losses and expenses
due to necessary business interruptions of, and the prohibition of access
to, its numerous Uncle Julio’s and Bartaco restaurants and other
property.

UJB further asserted claims for breach of contract, breach of the implied covenant

of good faith and faith dealing, and violations of the Texas Insurance Code.

Continental filed a general denial.

The parties agreed to phased discovery. Phase I was limited to discovery

related to UJB’s declaratory judgment and breach-of-contract claims. Phase II, if

needed, would include the extracontractual claims and alleged damages. After the

initial round of document production and depositions, the parties stayed additional

discovery to allow Continental to move for summary judgment on the limited ground

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that UJB could not establish coverage under any Policy provisions. The parties also

entered a Joint Factual Stipulation, which we quote as follows:

 No physical property at any covered restaurant location was tested
for the presence of the coronavirus on property at any covered
restaurant location at any time.

 No fact witness for Plaintiffs had personal knowledge of
information confirming the physical presence or non-presence of
the coronavirus on any covered property at any covered location.

 No fact witness for Plaintiffs had personal knowledge of any
property at any covered restaurant location that was different in
appearance or potential function, or that was missing or no longer
in Plaintiffs’ physical possession because of the presence of the
coronavirus.

 No fact witness for Plaintiffs has personal knowledge of any
property at any covered restaurant location that was different in
appearance or potential function, or that was missing or no longer
in Plaintiffs’ physical possession, because of the presence of the
coronavirus at the time the restaurant first reduced indoor dining
capacity, discontinued indoor dining, and/or discontinued outdoor
dining in or around March 2020.

 No fact witness for Plaintiffs has personal knowledge of
information confirming that any person who contracted COVID-19
became infected by touching covered property at any restaurant
location, or by entering a covered restaurant location.

 After each covered restaurant location first reduced indoor dining
capacity, discontinued indoor dining, and/or discontinued outdoor
dining in or around March 2020, some restaurant employees,
management, customers, and/or third-party vendors were permitted
to continue to enter the restaurant location for various purposes.

 Executive management of Uncle Julio’s and [B]artaco made the
decisions to reduce dining capacity or to suspend any operations at
each of their respective covered locations related to the COVID-19
pandemic.

–4–
 The references to “[n]o fact witness” in the stipulations above
include executive management of Uncle Julio’s and [B]artaco.

On February 15, 2022, Continental filed a traditional motion for summary

judgment. It argued, in part, that the applicable policy provisions required UJB to

establish “direct physical loss of or damage to” covered property at each location. It

contended that “consistent with [UJB’s] internal pre-litigation assessment” and

“hundreds of federal and state courts around the country, including at least 22

decisions by Texas courts,” the coronavirus that causes COVID-19 does not, as a

matter of law, cause direct physical loss of or damage to property.

Alternatively, even if COVID-19 could cause direct physical loss of or

damage to covered property, Continental argued any such loss or damage did not

cause a necessary interruption of UJB’s business. Although most restaurants

discontinued on-premises dining beginning in March 2020, a majority continued

offering takeout and delivery services, resumed outdoor dining in subsequent weeks,

and resumed reduced-capacity indoor dining by July 2020. Accordingly,

Continental maintained UJB closed its restaurants in response to civil authority

orders at a time when it was experiencing declining sales, and as soon as local

restrictions permitted, UJB resumed on-premises dining at most of its locations

despite COVID-19 continuing to spread through communities.

In its response, UJB argued that Continental did not meet its initial burden of

establishing its entitlement to judgment as a matter of law, and the summary

judgment burden never shifted to UJB as the non-movant. Alternatively, UJB
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contended it presented more than a scintilla of evidence to raise a genuine issue of

material fact to overcome summary judgment.

UJB also encouraged the trial court not to “follow the herd” of non-binding

federal and state case law concluding COVID-19 did not cause direct physical loss

of or damage to property as a matter of law because the cases were factually

distinguishable and conclusory in their analyses regarding the impact of COVID-19

on property. UJB presented a different theory. It argued, in part, that the physical

impact of infectious virus particles on restaurant surfaces and in indoor air

constituted “direct physical loss of or damage to property” under Texas law. Further,

it asserted each restaurant suffered necessary business interruptions because the

coronavirus caused the direct physical loss of or damage to each of its properties.

UJB attached thousands of pages of documents to its response, including expert

reports and affidavits of corporate executives.

On December 29, 2022, the trial court granted Continental’s motion for

summary judgment and dismissed all of UJB’s claims. UJB filed a motion for new

trial, which the trial court denied on March 23, 2023. This appeal followed.

Standard of Review

We review a summary judgment de novo. Trial v. Dragon, 593 S.W.3d 313,

316 (Tex. 2019). A traditional motion for summary judgment requires the moving

party to show no genuine issue of material fact exists, and it is entitled to judgment

as a matter of law. TEX. R. CIV. P. 166a(c); Lujan v. Navistar, Inc., 555 S.W.3d 79,

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84 (Tex. 2018). If the movant carries this burden, the burden shifts to the nonmovant

to raise a genuine issue of material fact. Lujan, 555 S.W.3d at 84. We take evidence

favorable to the nonmovant as true, and we indulge every reasonable inference and

resolve any doubts in the nonmovant’s favor. Ortiz v. State Farm Lloyds, 589

S.W.3d 127, 131 (Tex. 2019).

In an insurance coverage dispute, the insured initially bears the burden to

establish coverage under the policy at issue. Gilbert Tex. Constr., L.P. v.

Underwriters at Lloyd’s London, 327 S.W.3d 118, 124 (Tex. 2010); Ryan, LLC v.

Nat’l Union Fire Ins. Co. of Pittsburgh, PA, No. 05-22-00286-CV, 2023 WL

2472889, at *2 (Tex. App.—Dallas Mar. 13, 2023, no pet.) (mem. op.). When

interpreting an insurance policy to ascertain the parties’ intent, we construe the

policy according to general rules of contract construction. Gilbert Tex. Constr., L.P.,

327 S.W.3d at 126. We first look to the language of the policy itself. Id. “We give

terms their plain, ordinary, and generally accepted meaning unless the instrument

shows that the parties used them in a technical or different sense.” Heritage Res.,

Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996); Ryan, 2023 WL 2472889, at

*2. Thus, when a policy defines its terms, those definitions control. Evanston Ins.

Co. v. Legacy of Life, Inc., 370 S.W.3d 377, 381 (Tex. 2012); Ryan, 2023 WL

2472889, at *2. We are also mindful of other courts’ interpretations of policy

language that is identical or very similar to the language at issue because “[c]ourts

usually strive for uniformity in construing insurance provisions” that “are identical

–7–
across the jurisdictions.” RSUI Indem. Co. v. The Lynd Co., 466 S.W.3d 113, 118

(Tex. 2015) (quoting Nat’l Union Fire Ins. Co. of Pittsburgh, PA v. CBI Indus., Inc.,

907 S.W.2d 517, 522 (Tex. 1995) (per curiam)); Ryan, 2023 WL 2472889, at *2.

Discussion

In two issues, UJB argues the trial court erred by granting summary judgment

because Continental did not establish entitlement to judgment as a matter of law and

the evidence raised genuine issues of material fact regarding whether (1) COVID-

19 was present in any of UJB’s restaurants at the time operations were interrupted;

(2) the presence of COVID-19 in any of UJB’s restaurants caused the direct physical

loss of or damage to property; and (3) UJB closed its restaurants because of loss or

damage caused by COVID-19.

A. “Direct Physical Loss of or Damage to” Covered Property

The parties first dispute whether COVID-19 was present in UJB’s restaurants;

however, for purposes of our analysis, we assume, without deciding, that COVID-

19 was present. At the heart of this dispute, and critical to almost every coverage

provision at issue, is whether COVID-19 caused a “direct physical loss of or damage

to” any of UJB’s covered properties; therefore, we address this overarching issue

first.

The Policy does not define “physical loss” or “damage,” but the parties

stipulated in the trial court that the phrase “direct physical loss of or damage to

property” is not ambiguous and may be construed as a matter of law.

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Texas courts have interpreted “physical loss to require a tangible alteration or

deprivation of the property.” See U.S. Metals, Inc. v. Liberty Mut. Grp., Inc., 490

S.W.3d 20, 24 (Tex. 2015) (relying on Black’s Law Dictionary in defining

“physical” as “of, relating to, or involving material things; pertaining to real, tangible

objects”); de Laurentis v. United Servs. Auto. Ass’n, 162 S.W.3d 714, 723 (Tex.

App.—Houston [14th Dist.] 2005, pet. denied) (explaining “physical loss is simply

one that relates to natural or material things” and has been synonymous with or

equivalent to damage). Recently, the Fort Worth Court of Appeals recognized “an

intangible or incorporeal loss that is unaccompanied by a distinct, demonstrable,

physical alteration of property is not considered a direct physical loss.” See Great

Am. Ins. Co. of N.Y. v. Compass Well Servs., LLC, No. 02-19-00373-CV, 2020 WL

7393321, at *14 (Tex. App.—Fort Worth Dec. 17, 2020, pet. denied) (mem. op.).

Neither the Supreme Court of Texas nor any Texas court of appeals has addressed

whether COVID-19 can cause direct physical loss of or damage to a covered

property. The Fifth Circuit, along with numerous Texas federal district courts and

other courts around the country, has concluded that, as a matter of law, business

income losses resulting from the COVID-19 pandemic are not covered under

property insurance policies requiring a direct physical loss of or damage to property.

See, e.g., Terry Black’s Barbecue, L.L.C. v. State Auto. Mut. Ins. Co., 22 F.4th 450,

458 (5th Cir. 2022) (applying Texas law and the generally accepted meaning of

“physical loss” as requiring “tangible alteration of or deprivation of property”);

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Cinemark Holdings, Inc. v. Factory Mut. Ins. Co., No. 4:21-CV-00011, 2023 WL

2588548, at *6 (E.D. Tex. Mar. 21, 2023) (applying Terry Black’s).1 In reaching

this conclusion, the federal courts relied on Texas case law and made an Erie2 guess.

See, e.g., Terry Black’s, 22 F.4th at 458 (“We conclude the Texas Supreme Court

would interpret a direct physical loss of property to require a tangible alteration or

deprivation of property.”).3

The majority of jurisdictions to consider this question have concluded that

although the presence of COVID-19 may render property potentially harmful to

people, it does not constitute harm to the property itself. See, e.g., id. at 456

1
In construing the definition of “physical loss” to require a tangible alteration or deprivation of property
from COVID-19, the Fifth Circuit’s opinion in Terry Black’s joined several other jurisdictions, including
the Second, Sixth, Seventh, Eighth, Ninth, Tenth, and Eleventh Circuits. See 10012 Holdings, Inc. v.
Sentinel Ins. Co., Ltd., 21 F.4th 216, 222–23 (2d Cir. 2021) (concluding “direct physical loss” does not
extend to loss of use but requires physical damage); Santo’s Italian Café LLC v. Acuity Ins. Co., 15 F.4th
398, 401 (6th Cir. 2021) (“Whether one sticks with the terms themselves (a ‘direct physical loss of’
property) or a thesaurus-rich paraphrase of them (an ‘immediate’ ‘tangible’ ‘deprivation’ of property), the
conclusion is the same.”); Sandy Point Dental, P.C. v. Cincinnati Ins. Co., 20 F.4th 327, 333 (7th Cir. 2021)
(“‘[D]irect physical loss’ requires a physical alteration to property.”); Oral Surgeons, P.C. v. Cincinnati
Ins. Co., 2 F.4th 1141, 1144 (8th Cir. 2021) (“[T]here must be some physicality to the loss or damage of
property—e.g., a physical alteration, physical contamination, or physical destruction.”); Mudpie, Inc. v.
Travelers Cas. Ins. Co. of Am., 15 F.4th 885, 892 (9th Cir. 2021) (concluding “California courts would
construe the phrase ‘physical loss of or damage to’ as requiring an insured to allege physical alteration of
its property”); Goodwill Indus. of Cent. Okla., Inc. v. Philadelphia Indem. Ins. Co., 21 F.4th 704, 710 (10th
Cir. 2021) (“[A] ‘direct physical loss’ requires an immediate and perceptible destruction or deprivation of
property.”); Gilreath Fam. & Cosm. Dentistry, Inc. v. Cincinnati Ins. Co., No. 21-11046, 2021 WL
3870697, at *2 (11th Cir. 2021).
In Cinemark Holdings, Inc., the district court recognized that although the Fifth Circuit had not yet
defined “physical damage,” courts have relied on the definition used in Terry Black’s to conclude that the
ordinary and generally accepted meaning of “physical damage” likewise requires a tangible harm to the
insured property. 2023 WL 2588548, at *6; see also LNY 5003 LLC v. Zurich Am. Ins. Co., 631 F. Supp.
3d 431, 435 (S.D. Tex. Sept. 28, 2022) (noting the ordinary and common meaning of physical damage
requires a tangible harm to the insured property).
2
Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938).
3
The Fifth Circuit denied Terry Black’s motion to certify the question to the Supreme Court of Texas.
22 F.4th at 455 n.5.
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(concluding nothing physical or tangible happened to the restaurants at all and noting

plaintiffs always had ownership of, access to, and the ability to use all physical parts

of the restaurants at all times). COVID-19 poses a risk to individuals, but it is

ultimately a transitory virus that poses no long-term risk to inanimate property.

Ferrer & Poirot, GP v. Cincinnati Ins. Co., 36 F.4th 656, 658 (5th Cir. 2022) (per

curiam) (applying Texas law). “While COVID-19 has wrought great physical harm

to people, it does not physically damage property within the plain meaning of

‘physical.’” Id.

Relying on this case law, Continental asserts COVID-19 does not cause direct

physical loss of or damage to property. Simply stated, Continental maintains nothing

physical or tangible happened to the restaurants as a result of COVID-19 because

UJB continued to have “ownership of, access to, and the ability to use all of the

physical parts of the restaurants at all times.” To support its argument, Continental

presented evidence from UJB witnesses that nothing within the restaurants changed

as a result of the pandemic. Nothing was missing or functionally different, and UJB

did not buy or replace anything such as chairs, tables, or barstools. For example,

Jason Clarke, a regional director in Atlanta, testified tables functioned the same but,

“I would say they were broken because there was no one there spending money. But

in physical - - in their physical capacity, they were not damaged.” Further, the

parties stipulated:

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No fact witness for Plaintiffs has personal knowledge of any property
at any covered restaurant location that was different in appearance or
potential function, or that was missing or no longer in Plaintiffs’
physical possession, because of the presence of the coronavirus at the
time the restaurant first reduced indoor dining capacity, discontinued
indoor dining, and/or discontinued outdoor dining in or around March
2020.

Despite Continental’s evidence and the overwhelming body of case law, UJB

encourages this Court not to “follow the herd” because the federal cases are non-

binding, distinguishable, “and all based on judicial fact-finding rather than factual

and scientific evidence (which was either not presented or disregarded), flawed

reasoning, or no reasoning at all.” UJB contends it presented more than a scintilla

of evidence, through its expert testimony, to create a fact issue as to whether

COVID-19 particles caused physical loss of or damage to its restaurants.4

Rommie E. Amaro, a biochemist, explained in her expert report that the

combination of virus-plus-surface creates a new substance, called a fomite, that is

infectious and dangerous. The strength of the interactions between a viral particle

and a surface is governed by the types and quantities of the interactions formed, the

unique characteristic of the virus, and the properties of the surfaces themselves. She

stated, “Viruses generally, including SARS-CoV-2, interact with (i.e., adsorb or

adhere to) surfaces” through noncovalent interactions.

4
To the extent UJB directs us to a Houston district court case wherein the court denied an insurer’s
summary judgment based on claims similar to those at issue here and the case proceeded to trial, we note
that the Fourteenth Court of Appeals has not yet considered the appeal. See Lloyd’s Syndicate 1967
Subscribing to Pol’y B0180PG1922227 et al. v. Baylor College of Medicine, No. 14-22-00925-CV
(submitted December 7, 2023).
–12–
She stated, “[W]hen a surface becomes a fomite, it becomes an active source

of potential infection and unsuitable for normal use until restored to satisfactory

conditions.” She concluded that “most common surfaces that have SARS-CoV-2

bound to them will have different physical, measurable properties than similar

surfaces without the virus.” These fomites can be seen under a microscope. “Such

surfaces—now modified by the physical attachment of viral properties—are

damaged by becoming realistic vectors of concern in disease transmission.” But,

Amaro also explained fomites can be deactivated or removed with manual cleaning

and disinfecting and they deactivate on their own over time. Thus, the transmission

risk from a single touch of a surface is “generally low.”

David Dodge, a scientist specializing in applied toxicology research, opined

that most, if not all, authoritative organizations have recommended cleaning and

disinfecting measures to address the risks from COVID-19 exposure via fomite

transmission. He explained that cleaning and disinfecting significantly reduce viral

loads on surfaces. He acknowledged, “Fomite transmission is now generally viewed

as a less likely mode of transmission compared to inhalation and deposition, but

nonetheless one that is plausible, and worthy of precautionary measures.” Thus,

Dodge explained that despite UJB’s best practices for health and sanitation, and they

employed many, UJB could only reduce the risk of fomite transmission because

eliminating it was not feasible; as soon as an infected person walked into a restaurant,

the virus could be transferred to a surface and create a fomite.

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These opinions do not provide more than a scintilla of evidence to create a

genuine issue of material fact regarding whether COVID-19 causes direct physical

loss of or damage to property. Amaro acknowledged the noncovalent interactions

that cause particles to adsorb and adhere to surfaces, thereby forming fomites, are

not unique to COVID-19. She indicated “viruses generally, including SARS-CoV-

2” react accordingly. To ignore Amaro’s concession regarding the similarity

between COVID-19 and other viruses and conclude that fomites cause physical

damage to or loss of property would result in any airborne virus, such as the common

cold, triggering coverage. If such were the case, property everywhere would be in a

constant state of damage or loss. For these reasons, courts have rejected similar

arguments in the context of insurance coverage disputes regarding COVID-19. See,

e.g., Cinemark Holdings, 2023 WL 2588548, at *8 (holding the presence of COVID-

19 fomites did not cause physical loss or damage within the meaning of the policies

as a matter of law because to hold otherwise “would render every sneeze, cough, or

exhale a tangible alteration or deprivation of property”); see also Cosm. Laser, Inc.

v. Twin City Fire Ins. Co., 554 F. Supp. 3d 389, 407 (D. Conn. 2021) (stating

plaintiff’s theory “renders every sneeze, cough or even exhale a structural change,”

and “[t]hat cannot be right”).

Moreover, a property has not experienced “physical loss” or “physical

damage” when all that is required from the property owner is cleaning the surfaces

or simply waiting several days for the alleged physical alteration to resolve itself.

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See, e.g., Cinemark Holdings, 2023 WL 2588548, at *8 (noting COVID-19 particles

do not cause long-lasting change to the physical character of any property); Vandelay

Hosp. Grp. LP v. Cincinnati Ins. Co., No. 3:20-CV-1348-D, 2021 WL 2936066, at

*6 (N.D. Tex. 2021) (“The virus does not threaten the structures covered by property

insurance policies and can be removed from surfaces with routine cleaning and

disinfectant.”). COVID-19 does not linger on surfaces forever. Significantly,

although COVID-19 continues to circulate through communities, UJB continues to

operate its restaurants using the same property it alleged was physically damaged or

lost.

Similarly, to the extent the Policy covers air, we reject UJB’s argument its

property suffered physical loss or damage because of COVID-19 circulating inside

the restaurants. In Lamacar Inc. v. Cincinnati Casualty Company, the court

considered the “numerous scientific studies” purporting to illustrate how the virus

“can physically bond with, alter, and contaminate [various materials] leaving such

property susceptible to further transmission of COVID-19.” No. 3:21:CV-1396-S,

2022 WL 227162, at *2 (N.D. Tex. Jan. 26, 2020) (mem. op. and order). The court

concluded the lengthy descriptions of how the virus physically altered the

composition of air was insufficient to “plausibly allege the virus caused direct

physical damage to property.” Id. at *4; see also E. Coast Ent. of Durham, LLC v.

Houston Cas. Co., 31 F.4th 547, 551 (7th Cir. 2022) (concluding “the existence of

airborne particles carrying the virus” did not physically alter property). UJB cites

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several cases in which other courts have recognized air as insured property that can

be physically damaged. However, these cases do not involve COVID-19, and we

disagree with their analysis. Cf. Or. Shakespeare Festival Ass’n v. Great Am. Ins.

Co., No. 1:15-CV-01932-CL, 2016 WL 3267247, at *6 (D. Or. 2016) (finding

property physically damaged by smoke), vacated on other grounds, No. 1:15-CV-

01932-CL, 2017 WL 1034203 (D. Or. 2017); TRAVCO Ins. Co. v. Ward, 715 F.

Supp. 2d 699, 709 (E.D. Va. 2010) (concluding home suffered direct physical loss

because toxic gases released by Chinese drywall rendered home uninhabitable),

aff’d, 504 Fed. Appx. 251 (4th Cir. 2013). But see, e.g., Q Clothier New Orleans,

L.L.C. v. Twin City Fire Ins. Co., 29 F.4th 252, 259 (5th Cir. 2022) (distinguishing

insured’s reliance on drywall cases because property did not need to be removed or

replaced and COVID-19 did not make the stores inherently dangerous or

uninhabitable like the emission of sulfur gas from drywall).

Taking the evidence favorable to UJB as true, indulging every reasonable

inference in its favor, and resolving any doubts in its favor, we conclude UJB has

not presented more than a scintilla of evidence to create a genuine issue of material

fact that COVID-19 caused “direct physical loss of or damage to” its property,

meaning the virus caused a distinct, demonstrable, physical alteration to the

restaurants. Ortiz, 589 S.W.3d at 131 (summary judgment standard of review);

Great Am. Ins. Co. of N.Y., 2020 WL 7393321, at *14 (recognizing an intangible or

incorporeal loss unaccompanied by a distinct, demonstrable, and physical alteration

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of property is not a direct physical loss); DZ Jewelry, LLC v. Certain Underwriters

at Lloyds London, 525 F. Supp. 3d 793, 799 (S.D. Tex. 2021) (noting courts

considering similar claims have repeatedly stated COVID-19 does not cause

physical damage to property). In reaching this conclusion, we are mindful of and

persuaded by other courts’ interpretations of similar or identical policy language as

we “strive for uniformity in construing insurance provisions.” RSUI Indem. Co.,

466 S.W.3d at 118. Accordingly, the trial court did not err by granting summary

judgment on the following coverage provisions: Business Interruption,5 Denial of

Access by Civil Authority,6 Ingress-Egress,7 Contingent Business Interruption,8 and

Extra-Expense9 as each provision requires a “direct physical loss of or damage to

covered property” to trigger coverage. However, even if UJB had raised a fact issue

about whether COVID-19 damaged UJB’s property, as explained below, summary

judgment was still appropriate based on the following coverage provisions: Business

Interruption, Expenses Related to Costs, Extended Period of Indemnity, Civil

5
“This policy covers against loss resulting from necessary interruption of business caused by direct
physical loss of or damage to covered property.”
6
The policy covers actual loss sustained “during the period of time while access to the Insured’s
Location is prohibited by order of civil authority, but only when such order is given as a direct result of
physical loss or damage to property of the type insured from a peril insured against occurring at or in the
immediate vicinity of said Location.”
7
The policy covers actual loss sustained “during the period of time when as a direct result of physical
loss or damage to property . . . , ingress to or egress from the Insured’s Location is thereby physically
prevented.”
8
“[T]he policy is extended to pay for loss resulting from necessary interruption of business . . . caused
by direct physical loss or damage.”
9
“The Company will pay for the reasonable and necessary extra expense . . . incurred by the Insured in
order to continue as nearly as practicable the normal operations of the Insured’s business following direct
physical loss of or damage to covered property . . . .”
–17–
Authority and Ingress-Egress, Contingent Business Interruption, Professional Fees,

Leasehold Interest, and Loss Adjustment Expense.

B. Business Interruption

The Business Interruption provision covers losses “resulting from interruption

of business caused by direct physical loss of or damage to covered property,” with

some exceptions inapplicable to our analysis. The record does not raise a fact issue

showing UJB suffered any necessary business interruption caused by direct physical

loss of or damage to property. Rather, UJB discontinued on-premises dining because

of government mandates and the financial struggles at certain locations because of

the pandemic. These two independent reasons—not any direct physical loss of or

damage to property because of the presence of COVID-19—caused the business

interruption.

For example, a March 14, 2020 email stated, “Closing is increasingly

becoming an option, particularly in urban environments. It protects the brand and at

some level makes it simple and clear. Also makes the landlord negotiations easier.”

Some restaurants were underperforming before the pandemic. Internal UJB emails

indicated executives considered using the crisis as a bargaining tool with landlords

for rent deferrals because “[w]e can claim the crisis left us unable to re-open and

operate certain locations given a multitude of reasons.” One restaurant successfully

got out of its lease, which was a financial decision, not one spurred by direct physical

loss of or damage to property.

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On March 17, 2020, Uncle Julio’s executives distributed two emails

announcing restaurant closures:

 With an abundance of caution, we have made the difficult decision
to temporarily close all of our Uncle Julio’s locations. We have
been challenged balancing our team[’s] ability to earn income; our
commitment to serve guests; and our need to manage the finances
of the business. Ultimately, our team, our community and our guest
safety always comes first.

 Today we are officially closing the Uncle Julio’s RSC until further
notice . . . . This decision is being driven by Dallas County closing
all restaurants, bars and public gatherings of 50 or more.

In a March 18, 2020 email, Tom Vogel, Uncle Julio’s CEO, stated that

COVID-19 had an unprecedented negative impact on restaurants, and despite doing

“the best we could to try and remain open for business . . . we had no choice but to

close thirty restaurants based on state and local mandates.” Subsequently, Uncle

Julio’s closed fourteen more “to follow CDC and federal guidelines for social

distancing.” Vogel further stated closing certain locations may be necessary in areas

“where closing will be so common that it could be viewed as irresponsible to remain

open.” Other restaurants were later closed “due to a lack of takeout business.”

Bartaco’s Florida regional director stated in his deposition that the Florida locations

discontinued indoor dining because they were required to by a March 20, 2020

executive order.

Thus, the evidence shows UJB did not suffer any business interruption caused

by a direct physical loss of or damage to the property. Rather, other factors caused

the business interruption. In reaching this conclusion, we reject UJB’s attempt to
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create a fact issue by relying on executive orders indicating in-person dining was

closed because of physical loss of or damage to property. UJB refers to “many”

such orders but only cites one order issued by Dallas County Judge Clay Jenkins. In

a footnote, UJB cites to over one-hundred fifty pages of the Clerk’s Record for other

“applicable orders expressly referencing property loss or damage.” While we do not

have an independent duty to review voluminous records, we reviewed those papers

and found only one other order referencing loss of or damage to property—a Harris

County order from March 20, 2020.

Both orders stated they were necessary because “the virus is physically

causing property damage due to its proclivity to attach to surfaces for prolonged

periods of time” (Dallas County order) and “the COVID-19 virus causes property

loss or damage due to its ability to attach to surfaces for prolonged periods of time”

(Harris County order). The focus of both orders, however, like the other executive

orders from around the country, was the necessity “to protect the lives, health, and

safety of the [Dallas] County’s residents from the devastating impacts of the

pandemic.” It was “essential that the spread of the virus be slowed to protect the

ability of public and private health care to handle the influx of new patients and

safeguard public health and safety.” The overall purpose of the Dallas County order

was to slow the spread of the virus to protect people, not property. See, e.g., Terry

Black’s, 22 F.4th at 459 (civil orders restricting dine-in restaurant service did not

cause direct physical loss of property and “were enacted to avoid exposure to

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COVID-19, not because of exposure” and to take measures to contain and to prevent

the spread); NTT DATA Int’l LLC v. Zurich Am. Ins. Co., No. 3:21-CV-890-S, 2022

WL 196533, *6 (N.D. Tex. 2022) (concluding civil orders responding to risks posed

by global pandemic do not satisfy policy requirement that losses result from direct

physical loss of or damage to property).

Accordingly, UJB failed to present evidence creating a fact issue that its

restaurants’ business interruptions were caused by direct physical loss of or damage

to property, and the trial court did not err by granting the motion for summary

judgment.10

C. Civil Authority and Ingress-Egress Provisions

Under the Civil Authority provision, for coverage to arise, access to UJB’s

restaurants must be “prohibited by order of civil authority” that was given “as a

direct result of physical loss or damage to property . . . at or in the immediate

vicinity” of the restaurants. The Fifth Circuit has interpreted similar civil authority

provisions to require “a nexus between the civil authority order and property damage

10
Summary judgment was also appropriate under the Expense Related to Reducing Loss provision
because it covers “expenses as are necessarily incurred for the purpose of reducing a Time Element loss . .
. .” Business Interruption is a “time element” loss under the Policy.
Similarly, the Extended Period of Indemnity provision covers loss “sustained by the Insured resulting
directly from the interruption of business.” Thus, summary judgment was also appropriate on this claim.
Finally, summary judgment was appropriate on the Contingent Business Interruption provision, which
covers “loss resulting from necessary interruption of business . . . caused by direct physical loss or damage
to” any real or personal property of (a) “direct suppliers or service providers,” (b) “direct customers” and
(c) “property operated by others . . . to attract customers . . . within five miles.” Because UJB is not entitled
to coverage under the Business Interruption provision, it likewise is not entitled to coverage under the
Contingent Business Interruption provision. Moreover, UJB never alleged or provided facts showing any
physical loss or damage to suppliers, service providers, customers, or dependent property of the restaurants.
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or losses near the insured premises.” Q Clothier New Orleans, L.L.C., 29 F.4th at

260 (citing Dickie Brennan & Co. v. Lexington Ins. Co., 636 F.3d 683, 686 (5th Cir.

2011) (interpreting provision using “due to” as requiring a nexus under Louisiana

law)).

In Q Clothier, the insured argued the civil authority extension in its insurance

policy covered its loss of business income after state and local officials required it

to close in response to the pandemic. Id. at 256. The court determined “the direct

result of” language in the policy required Q Clothier to allege a plausible causal

relationship between the order of civil authority and damage or loss to its property.

Id. at 260. The court rejected Q Clothier’s claim that the civil authority orders were

issued because of damage to or loss of property near its stores. Id. Rather, because

the orders called for preventative measures to avoid damage and contamination from

COVID-19, the civil authority orders were a “direct result” of “the global pandemic

and the need to take measures to contain and prevent the spread of COVID-19.” Id.

(citing Terry Black’s, 22 F.4th at 458–59).

The Fifth Circuit’s reasoning is sound, and we reach the same conclusion.

Although the Dallas County April 6, 2020 executive order issued by Judge Clay

Jenkins referenced the virus “causing property damage due to its proclivity to attach

to surfaces for prolonged periods of time,” UJB provided no evidence the order was

given as a direct result of physical loss of or damage to property occurring “at or in

the immediate vicinity” of any of its restaurants. Rather, it was issued to prevent

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exposure to COVID-19, not because of exposure to COVID-19. See, e.g., Terry

Black’s, 22 F.4th at 458–59. In fact, the order states as much in its declarations:

WHEREAS, this Emergency Order is necessary to protect the lives,
health, welfare, and safety of the County’s residents from the
devastating impacts of this pandemic: . . .

[I]t is essential that the spread of the virus be slowed to protect the
ability of the public and private health care providers to handle the
influx of new patients and safeguard public health and safety. Because
of the risk of the rapid spread of the virus, and the need to protect the
most vulnerable members of the community, this Order requires all
individuals anywhere in Dallas County to shelter in place . . . .

But for one passing statement about property damage, the crux of the order was to

protect people from the virus. Thus, even if UJB raised a fact issue that COVID-19

caused physical loss of or damage to the restaurants, summary judgment was proper

because of the absence of a causal link between the issuance of the civil authority

order and direct physical loss of or damage to property at or in the immediate vicinity

of UJB’s restaurants.

Under the Ingress-Egress provision, the Policy covered actual loss sustained

as a “direct result” of physical loss or damage to property during the time ingress

and egress was “physically prevented.” The evidence conclusively establishes

UJB’s employees were never physically prevented from entering or exiting the

restaurants. To the contrary, Shari Tessler, with Uncle Julio’s in Orlando, testified

employees used one restaurant as a call center to manage the influx of to-go orders

while the restaurants were closed for in-person dining. Neither a governmental

authority nor UJB instructed employees not to access the restaurant. Jason Clarke,
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with Bartaco in Georgia, testified there was not a time when employees were not

permitted access to the restaurants when they were open only for takeout and

delivery; rather, managers and employees were free to go in as needed. Scott

Lawton, the president and CEO of Bartaco, admitted there were “rare occasions”

Bartaco might let a patron come inside the restaurant “such as a rainy day.”

Accordingly, even if COVID-19 caused a physical loss or damage to the restaurants,

access to the UJB’s restaurants was not prohibited. Therefore, the trial court did not

err by granting summary judgment on this basis.

D. Professional Fee Coverage

The Professional Fee provision covers “the fees of architects, surveyors,

consulting engineers and fees of other professionals necessarily incurred in the work

of repairing or rebuilding the property following a loss.” Numerous UJB witnesses

testified they did not need to rebuild or repair any part of the restaurants because of

COVID-19. Rather, items such as tables, chairs, silverware, and barstools

functioned the same as before the pandemic and did not need replacing. UJB

likewise stipulated no fact witness had personal knowledge that any covered

property “was different in appearance or potential function” because of the presence

of COVID-19. Further, UJB presented no evidence that architects, surveyors,

consulting engineers, or other professionals were engaged to repair or rebuild any

property. Accordingly, the trial court did not err by granting summary judgment on

this coverage provision.

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E. Leasehold Interest

The Leasehold Interest provision provides coverage for actual loss for “actual

rent which remains payable for the unexpired term of the lease if such property

becomes wholly untenable or unusable.” UJB presented no evidence that its

restaurants became “wholly untenable or unusable” during the pandemic.

Accordingly, the trial court did not err by granting summary judgment on this

coverage provision.

F. Loss Adjustment Expense

The Loss Adjustment Expense provision covers “reasonable expenses

incurred by the Insured in preparing claim data when required by Insurer.” Because

Continental has maintained the Policy did not provide coverage, it never required or

sought any claim data such as “inventories, obtaining appraisals and preparing other

documentation to show the extent of the loss.” Thus, UJB did not incurr any

expenses to prepare claim data. Accordingly, the trial court did not err by granting

summary judgment on this coverage provision.

G. Extracontractual Claims

Finally, UJB brought claims for bad faith and other unfair insurance practices.

As a general rule, there can be no claim for bad faith when an insurer promptly

denied a claim that is in fact not covered. See JAW The Point, L.L.C. v. Lexington

Ins. Co., 460 S.W.3d 597, 602 (Tex. 2015); Alaniz v. Sirius Int’l Ins. Corp., 626 Fed.

App’x 73, 79 (5th Cir. 2015) (concluding extracontractual claims pursuant to

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common law and Texas Insurance Code failed because the breach of contract claim

from which they arose failed). Because summary judgment was proper on UJB’s

coverage claims, UJB’s arguments as to its extracontractual claims necessarily fail.

See Nicholas Petroleum, Inc. v. Mid-Continent Cas. Co., No. 05-13-01106-CV, 2015

WL 4456185, at *6 (Tex. App.—Dallas July 21, 2015, no pet.) (mem. op.).

Accordingly, the trial court did not err by granting summary judgment on UJB’s

claims for breach of the implied covenant of good faith and fair dealing and

violations of the Texas Insurance Code for (1) unfair methods of competition and

unfair or deceptive acts or practices (2) and prompt payment of claims.

Conclusion

We affirm the trial court’s judgment.

/Erin A Nowell/
ERIN A. NOWELL
JUSTICE

230116F.P05

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S
Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT

JULIO & SONS COMPANY; On Appeal from the 44th Judicial
BARTECA RESTAURANTS, LLC; District Court, Dallas County, Texas
UNCLE JULIO’S ANNAPOLIS Trial Court Cause No. DC-21-02194.
CONCESSIONS, LLC; UNCLE Opinion delivered by Justice Nowell.
JULIO’S COLUMBIA Justices Miskel and Kennedy
CONCESSIONS, LLC; UNCLE participating.
JULIO’S CORPORATION; UNCLE
JULIO’S OF FLORIDA, INC.;
UNCLE JULIO’S OF GEORGIA,
INC; UNCLE JULIO’S OF
ILLINOIS, INC.; UNCLE JULIO’S
OF RESTON, INC.; UNCLE
JULIO’S OF TENNESSEE, INC.;
UNCLE JULIO’S OF TEXAS, INC.;
UNCLE JULIO’S RIO GRANDE
CAFÉ, INC.; CONROE FOODS,
INC.; HACIENDA II PARTNERS,
LLP; SOUTHWEST
RESTAURANT PARTNERS, LLLP;
THE MEXICAN RESTAURANT,
INC.; 15-16 LLC; 2004
RESTAURANT, LLC; 2016
RESTAURANT, LLC; 971
FARMINGTON, LLC; BARTACO
PORT CHESTER, LLC; BARTACO
STAMFORD, LLC; BARTACO 12

–27–
SOUTH, LLC; BARTACO
AVENTURA, LLC; BARTACO
BALLSTON, LLC; BARTACO
CHAPEL HILL, LLC; BARTACO
CLOUD KITCHEN WMT, LLC;
BARTACO DEERFIELD, LLC;
BARTACO DR. PHILLIPS, LLC;
BARTACO FORT POINT, LLC;
BARTACO HILLDALE, LLC;
BARTACO HYDE PARK, LLC;
BARTACO INMAN PARK, LLC;
BARTACO KOP, LLC; BARTACO
MARIETTA, LLC; BARTACO
MOSAIC, LLC; BARTACO
NORTH HILLS, LLC; BARTACO
PEARL WEST, LLC; BARTACO
RESTON, LLC; BARTACO
ROSWELL, LLC; BARTACO
TEJON, LLC; BARTACO
WASHINGTON DC, LLC;
BARTACO WESTPORT, LLC;
AND BARTACO WYNWOOD,
LLC, Appellants

No. 05-23-00116-CV V.

CONTINENTAL CASUALTY
COMPANY, Appellee

In accordance with this Court’s opinion of this date, the judgment of the trial
court is AFFIRMED.

It is ORDERED that appellee CONTINENTAL CASUALTY COMPANY
recover its costs of this appeal from appellants JULIO & SONS COMPANY,
BARTECA RESTAURANTS, LLC; UNCLE JULIO’S ANNAPOLIS
CONCESSIONS, LLC; UNCLE JULIO’S COLUMBIA CONCESSIONS, LLC;
UNCLE JULIO’S CORPORATION; UNCLE JULIO’S OF FLORIDA, INC.;
–28–
UNCLE JULIO’S OF GEORGIA, INC; UNCLE JULIO’S OF ILLINOIS, INC.;
UNCLE JULIO’S OF RESTON, INC.; UNCLE JULIO’S OF TENNESSEE, INC.;
UNCLE JULIO’S OF TEXAS, INC.; UNCLE JULIO’S RIO GRANDE CAFÉ,
INC.; CONROE FOODS, INC.; HACIENDA II PARTNERS, LLP; SOUTHWEST
RESTAURANT PARTNERS, LLLP; THE MEXICAN RESTAURANT, INC.; 15-
16 LLC; 2004 RESTAURANT, LLC; 2016 RESTAURANT, LLC; 971
FARMINGTON, LLC; BARTACO PORT CHESTER, LLC; BARTACO
STAMFORD, LLC; BARTACO 12 SOUTH, LLC; BARTACO AVENTURA,
LLC; BARTACO BALLSTON, LLC; BARTACO CHAPEL HILL, LLC;
BARTACO CLOUD KITCHEN WMT, LLC; BARTACO DEERFIELD, LLC;
BARTACO DR. PHILLIPS, LLC; BARTACO FORT POINT, LLC; BARTACO
HILLDALE, LLC; BARTACO HYDE PARK, LLC; BARTACO INMAN PARK,
LLC; BARTACO KOP, LLC; BARTACO MARIETTA, LLC; BARTACO
MOSAIC, LLC; BARTACO NORTH HILLS, LLC; BARTACO PEARL WEST,
LLC; BARTACO RESTON, LLC; BARTACO ROSWELL, LLC; BARTACO
TEJON, LLC; BARTACO WASHINGTON DC, LLC; BARTACO WESTPORT,
LLC; AND BARTACO WYNWOOD, LLC.

Judgment entered July 3, 2024.

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