By Carolina Bolado

Law360 (March 25, 2020, 7:35 PM EDT ) As Florida hotels, normally at full occupancy in March, sustain massive losses because of the coronavirus pandemic, their attorneys are scrambling to help them ride out the shutdown by exploring everything from potential coverage in commercial insurance policies to help from the government.

Hotels around the state have either been closed by local government order or are mostly empty at a time of year they are usually filled with spring breakers fleeing colder climes for beaches and theme parks.

"We're doing what we can to try and minimize this mess, but there just comes a point where we're just going to have to ride it out," said Louis Terminello, chair of Greenspoon Marder LLP's hospitality, alcohol and leisure industry group. "This is no hurricane aftermath. This is long-term. A lot of places are not going to survive."

One place hospitality attorneys are looking for relief is business interruption clauses in commercial property insurance policies that typically insure against losses caused by physical damage to a property. Terminello says Greenspoon Marder's hospitality team has been looking closely at clients' insurance policies to see if there is a case for coverage.

But attorneys say it will likely be an uphill battle for policyholders in court, as the coronavirus-related losses involve no structural damage to the property itself.

Julie Nevins, an insurance litigator at Stroock & Stroock & Lavan LLP, says that many property policies have specific exclusions for viruses that were implemented after the SARS epidemic in 2002. Many policies also have pollution exclusions, and bacteria have been considered part of those exclusions, according to Nevins.

"Insurance companies would say these policies were never written or issued to cover this type of scenario," Nevins said. "We'll just have to see how courts respond to that."

She pointed out that when United Airlines sued its insurer for business interruption coverage after the 9/11 terror attacks, the carrier lost at both a federal district court and the Second Circuit. United wanted to recover for lost earnings caused by the government's temporary shutdown of Ronald Reagan Washington National Airport because of the nearby attack on the Pentagon. But the Second Circuit reasoned that because the lost earnings did not stem from physical damage to the airport or an adjacent property, the losses were not covered.

John Meagher, chair of the insurance practice group at Shutts & Bowen LLP, said noxious gases and fumes have sometimes been covered under business interruption clauses if they rendered a property unusable. Attorneys will likely try to prove contamination if the coronavirus was found on a property and made it unusable, he said.

"Lawyers are going to be flyspecking these provisions, trying to see what kind of coverage they can get for their clients," Meagher said. "To the extent a policy language is ambiguous, the insured wins that battle."

Akerman LLP's Andy Robins, who co-chairs the firm's hospitality group, stressed that whether or not business interruption coverage is likely under a hotel's policy, the hotel needs to file any notice required by the policy so that potential claims are not extinguished on procedural grounds.

In addition to help from insurers, hotel operators are turning to government for relief to get them through the crisis, according to Alexander Tachmes, chair of the land use and government relations practice group at Shutts & Bowen.

That includes an emergency fund for laid-off hospitality employees and abatement of collection of real estate and resort taxes. In Miami Beach, for example, where hotels were ordered shut last weekend, the city levies and collects the resort tax, the county collects real estate taxes, and the Florida Department of Revenue collects additional taxes, according to Tachmes. He is hoping to get abatements from each governmental entity.

"The primary focus now is on a big government push," Tachmes said. "I don't think any of the hotel companies really believe they can survive this without government help."

For hotels that are operating under franchise agreements with hotel chains, Robins hopes brands will be flexible about the franchisees raiding their cash reserves, which are typically required under a franchise agreement for updates to furniture, fixtures and equipment. He said that typically, 5% of a hotel's gross revenue will go into this reserve on a monthly basis and will not be not touched by the owner, but in difficult times, the fund can be an important cash supply that could help keep the business afloat.

"I expect there will be lots of latitude from brands and banks to use that cash for operating expenses," Robins said. "But that has to be approved by both lenders and managers."

Some hotels in places like Miami and elsewhere that have been shut down completely by government order are looking to bid for contracts to house first responders, airline crews, the National Guard and other essential workers who are exempt from lodging prohibitions. It's a smart approach, according to Tachmes, and could help bring in some revenue to get through the outbreak.

Those hotels may also be better positioned to return to full service more quickly once the worst of the pandemic has passed, according to Robins. Even then, most hotels are likely looking at 60 days to get up and running, he said.

"You don't turn the light switch on and be in business overnight," Robins said.

--Editing by Jill Coffey and Alanna Weissman.

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