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Law360 (September 22, 2020, 4:36 PM EDT ) Hartford Fire Insurance Co. has urged a Connecticut federal judge to ax a proposed class action lodged by a New York hospitality group seeking coverage for COVID-19 closures, arguing that the policy expressly excludes virus loss and that the group failed to allege direct physical damage.
Hartford said Monday that New York-based SA Hospitality Group LLC was not able to show any particular physical damage or loss on its covered property or that government closure orders prohibited access to its restaurants. The orders have "nothing to do with property damage," the carrier said.
"While the COVID-19 pandemic has impacted businesses in unprecedented ways, it cannot vitiate the terms of Hartford Fire's insurance contract to create coverage where none exists," the insurer said in the dismissal motion.
Hartford contended that SA Hospitality's "hairsplitting" argument, that the policy's virus exclusion does not apply because its revenue loss was caused by government orders instead of the novel coronavirus, is not consistent with the policy language.
SA Hospitality hit Hartford with a proposed class action in July, claiming that the group and its 17 subsidiaries suffered physical damage from the pandemic covered under its all-risk policy with Hartford. Hartford denied its claim in early April, asserting that the group's properties had not suffered any direct physical loss and the alleged losses were excluded by the bacteria and virus exclusion.
On Monday, Hartford said the suit should be dismissed because SA Hospitality was not able to show any specific property that was lost or damaged, and the group failed to allege that its access was "specifically prohibited" by the government orders because its restaurants have been allowed to provide delivery and takeout services.
The "stay at home" orders were issued to ensure social distancing and slow the spread of COVID-19 but were not carried out because of physical damage in the "immediate area" of SA Hospitality's restaurants, Hartford said.
The carrier also cited previous case law that there is no direct physical loss involved when a business is forced to close for reasons external to its premises and not related to property damage. Hartford urged the court to follow other recent rulings "across the country" that have enforced virus exclusions in coverage disputes regarding COVID-19 closure orders.
"The suspension of SA Hospitality's business was at least a 'result from' — that is, there is at least some causal connection to — the virus. And the suspension of non-essential businesses was premised on the COVID-19 pandemic," Hartford said. "The virus exclusion should be enforced as written."
Representatives of the parties could not be immediately reached for comment Tuesday.
SA Hospitality Group is represented by Christopher Ayers of Seeger Weiss LLP
Hartford is represented by Timothy A. Diemand of Wiggin and Dana LLP and Sarah D. Gordon, Charles Michael and Meghan Newcomer of Steptoe & Johnson LLP.
The case is SA Hospitality Group LLC et al. v. Hartford Fire Insurance Co., case number 3:20-cv-01033, in the U.S. District Court for the District of Connecticut.
--Editing by Orlando Lorenzo.
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