By Mike Curley

Law360 (June 23, 2020, 2:33 PM EDT ) Underwriters at Lloyd's London are asking a Florida federal court to throw out claims by a group of restaurants suing to force the insurers to cover losses suffered during the COVID-19 pandemic, saying the policies require there be physical damage to the properties to apply.

In a brief filed Monday, the underwriters argued that the proposed class action filed by El Novillo Restaurant and others fails to show that the businesses shut down because of physical damage, adding that the pandemic falls under several exclusions in the policies.

The brief pointed to language in the policies for business interruption coverage that says they cover costs between when the physical loss takes place and when the premises are "repaired, rebuilt or replaced." That language shows that the policies only apply to physical damage, not to preemptive shutdowns to slow down a pandemic, according to Lloyd's.

Likewise, Lloyd's argued that the civil authority clause in the contracts also requires that there be physical loss to apply, while the COVID-19 pandemic did no such damage. In addition, the insurers told the court that restaurants such as El Novillo were not required to close, but instead were encouraged to continue operating on a take-out, delivery and curbside basis.

According to the brief, the pandemic also falls under at least two exclusions for losses caused by microorganisms and pollution. Lloyd's argued that the coronavirus that causes COVID-19 is "unquestionably" a microorganism, and that the Florida Supreme Court has recognized that pollution exclusions can also apply to viruses.

The El Novillo Restaurant group, which has two eateries in Miami and Hialeah, sued the Lloyd's underwriters in April, asking the court to declare that governments' stay-at-home orders to stop the spread of the coronavirus have caused catastrophic business disruptions and must trigger coverage under holders' all-risk commercial property insurance policies.

In the proposed class action, the restaurant group says it anticipates that the Lloyd's entities will breach their contractual obligations under common all-risk commercial property insurance policies. They seek a declaratory judgment on behalf of the El Novillo restaurants as well as all proposed class members that the policies don't contain an exclusion for a viral pandemic.

In Monday's brief, Lloyd's also challenged the bid for class relief, saying that the El Novillo restaurants don't even fit their proposed class definition. According to the brief, the complaint defines the class as those using "standard" policies without pandemic exclusions, but El Novillo's policies have endorsements making them nonstandard and contain exclusions that bar relief for a pandemic.

In addition, Lloyd's argued that the restaurants can't show that common questions and facts predominate, as the proposed class encompasses all 50 states and the court would have to look at different shutdown orders from different states and municipalities, as well as look into individualized questions of each class member's circumstances and types of businesses.

Javier A. Lopez of Kozyak Tropin & Throckmorton LLP, representing the restaurants, called the underwriters' arguments baseless Tuesday, saying their brief shows they will do anything to avoid their payment obligations.

"It's unfortunate that during this global pandemic crisis, defendants and other insurers have chosen to reject claims and coverages that their policyholders have faithfully paid for at a time when this coverage is needed the most," he said. "Defendant's arguments have no support in fact or law, and we remain confident that coverage exists and the Defendant will have to meet their contractual coverage obligations."

Lloyd's and other insurers are facing a slew of suits over business interruption coverage stemming from government orders to close down nonessential businesses in the effort to stem the spread of COVID-19. In another, similar suit, a set of Texas movie theaters are also targeting Lloyd's with claims the insurer is refusing to pay out on a $1 million policy.

Representatives for Lloyd's could not immediately be reached for comment Tuesday.

El Novillo Restaurant is represented by Harley S. Tropin, Benjamin Widlanski, Gail A. McQuilkin, Javier A. Lopez and Robert Neary of Kozyak Tropin & Throckmorton LLP.

The underwriters are represented by Armando P. Rubio of Fields Howell LLP.

The case is El Novillo Restaurant et al. v. Certain Underwriters At Lloyd's London et al., case number 1:20-cv-21525, in the U.S. District Court for the Southern District of Florida.

--Additional reporting by Joyce Hanson. Editing by Abbie Sarfo.

For a reprint of this article, please contact reprints@law360.com.