By Matthew Santoni

Law360 (September 25, 2020, 4:08 PM EDT ) After being denied multiple bids to have a federal court hear a Pittsburgh restaurant's lawsuit seeking insurance coverage for COVID-19 closures, Motorists Mutual Insurance Co. will ask the Third Circuit to decide if the case belongs before a state judge or a federal one.

U.S. District Judge Nora Barry Fischer has repeatedly declined to exercise jurisdiction over the insurance case brought by DiAnoia's Eatery, citing a lack of guidance from state court rulings and her discretion to pass on the case under the Declaratory Judgment Act. Motorists filed notice Thursday that it was appealing the decision.

"Notice is hereby given that Motorists Mutual Insurance Company … hereby appeals to the United States Court of Appeals for the Third Circuit from the order by which the court declined to exercise its subject matter jurisdiction," the insurer's notice said.

Judge Fischer officially denied a motion to reconsider her remand, but held off on formally transmitting her order remanding the case to the Allegheny County Court of Common Pleas while the appeal was pending.

DiAnoia's, located in Pittsburgh's Strip District, filed suit in state court in late April, claiming that Motorists had improperly denied its claim for losses due to state-mandated coronavirus closures.

Motorists had the case removed to federal court, saying the insurer was based in Ohio and the underlying claim was for more than the federal court's $75,000 damages threshold, but Judge Fischer remanded it days later on the grounds that there wasn't enough precedent yet from state courts on whether COVID-19-related closures should be considered covered losses.

The insurer tried to move the case to federal court again in June, arguing that by seeking a declaratory judgment that Motorists had to cover its losses during the closures, DiAnoia's was essentially making a breach of contract claim that the federal court did not have the ability to reject. The judge disagreed in an Aug. 27 order to remand the case back to state court.

"Plaintiff's single-count declaratory judgment action simply does not state a breach of contract action against defendant seeking damages," the  order said. "The fact that plaintiff could have brought additional claims in this action does not negate the court's discretion under the DJA."

But the judge held off on sending the final order to the state court, and Motorists filed a motion for reconsideration while it prepared an appeal, in case the remand order fully ended the federal court's jurisdiction. With the appeal filed Thursday, Judge Fischer denied the motion for reconsideration as moot and said her order would be sent to the state court "at the appropriate time."

Scott B. Cooper of Schmidt Kramer PC, representing DiAnoia's, told Law360 on Friday that he believed the appeal and the effort to keep the case in federal court was a delay tactic and an effort to avoid a direct state-court ruling on the interpretation of whether COVID-19 closure losses should be covered under Pennsylvania law.

He said Pennsylvania law favored the insured party in cases where policy language was ambiguous, though federal courts in other jurisdictions, including Michigan; Illinois; California; and Washington, D.C., have been finding that the pandemic-related closures weren't "physical losses" triggering coverage, or were excluded by some policies' virus exceptions.

"They're just trying to delay cases so they can avoid being heard in state court," Cooper said. "They're trying to delay so they can come into state court and point to all these federal cases instead of saying, 'Let's look at Pennsylvania case law.'"

Counsel for Motorists declined to comment Friday.

DiAnoia's is represented by James C. Haggerty of Haggerty Goldberg Schleifer & Kupersmith PC, Scott B. Cooper of Schmidt Kramer PC, John P. Goodrich of Goodrich & Associates PC and Jonathan Shub of Kohn Swift & Graf PC.

Motorists Mutual Insurance is represented by Matthew A. Meyers, Robert E. Dapper Jr. and Taylor M. Wantz of Burns White LLC.

The case is DiAnoia's Eatery LLC v. Motorists Mutual Insurance Co., case number 2:20-cv-00787, in the U.S. District Court for the Western District of Pennsylvania and DiAnoia's Eatery LLC v. Motorists Mutual Insurance Co., case number GD-20-005273, in the Court of Common Pleas of Allegheny County, Pennsylvania.

--Additional reporting by Mike Curley and Daphne Zhang. Editing by Abbie Sarfo.

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