By Mike Curley

Law360 (January 27, 2021, 3:52 PM EST ) A Florida restaurant is heading to the U.S. Supreme Court in a bid to revive claims that its insurer wrongly denied it coverage for losses stemming from road construction near its location, saying that an answer to the question of what defines "physical loss" at the heart of the suit is critical given the hundreds of COVID-19-related suits facing the same issue.

In a petition for certiorari filed two weeks ago, Mama Jo's Inc., which runs the Miami restaurant Berries in the Grove, asked the high court to overturn a decision in the Eleventh Circuit, which held that under Florida law, physical loss or damage requires that the property be rendered unusable and requires physical repairs, and therefore Sparta Insurance Co. was off the hook for coverage.

The restaurant argued that there is a split among the circuit courts, with several courts having held like the Eleventh that physical loss or damage requires structural damage, while others have held that things like dust and viruses constitute such damage.

As hundreds of businesses grapple with their insurers over whether COVID-19 and the lockdowns intended to stop its spread can be considered physical loss or damage, now is the time for the Supreme Court to issue a federal ruling to settle the issue, the restaurant argued.

"The opinion affects the rights of millions of property and business owners who have insured their assets with all-risk policies," the restaurant said. "Potentially billions of dollars of proceeds are inextricably tied to the interpretation of the term 'physical loss.'"

"What would ordinarily be a state law question has become a federal question of policy interpretation that can and should be answered by this court," the restaurant added.

Regarding its specific policy, Mama Jo's told the court that the Eleventh Circuit's ruling and Sparta's denial run counter to language in the policy that expressly considers things like dust to be losses covered under the policy.

In the petition, the restaurant pointed to an exclusion for coverage of interior dust, saying this indicates that exterior dust by contrast would be covered under the all-risks policy. Likewise, coverage of pollutants is limited, but not excluded, under the policy, the restaurant said.

By finding that physical loss or damage requires structural damage that makes the building unusable and which requires repairs, the Eleventh Circuit makes large portions of the policy meaningless, the restaurant argued.

"The [Eleventh Circuit's] opinion renders entire areas of coverage nonexistent, contrary to the express terms of the policy," Mama Jo's said. "To require permanent tangible destruction of property as a condition precedent to insurance coverage strips petitioner, and policyholders across the country, of protections specifically contemplated and bargained for."

The dispute dates back to December 2014 when Mama Jo's first sought coverage from Sparta for a little over $16,275 to cover cleaning and paint restoration, as well as roughly $292,550 for its estimated loss of sales due to the roadwork, according to court documents. Berries later added a claim for $319,688 for repairs to its HVAC system and other equipment in the restaurant.

Sparta denied coverage for the claim in January 2017, asserting there was no evidence of covered, direct physical loss or damage to the restaurant, court filings said, prompting the suit. In June 2018, Chief U.S. District Judge K. Michael Moore sided with Sparta, finding that the restaurant hadn't shown that it suffered physical loss or damage as defined under Florida law.

In August 2020, the Eleventh Circuit affirmed Judge Moore's decision, finding no reason to disturb the ruling that under Florida law, that phrase refers to tangible damage that renders a property "unsatisfactory for future use or requires repairs" — which did not occur in Mama Jo's case, because it was able to clear its premises of the roadwork-related debris.

In its petition for certiorari, Mama Jo's also took aim at the Eleventh Circuit's decision affirming that its expert witnesses were inadmissible. Even though the district court found that their credentials were not in question, it dismissed them as unreliable because they hadn't done certain kinds of testing, a requirement above and beyond what's normally needed for expert witnesses, the restaurant said.

In doing so, the district court prejudged their testimony, usurping the role of the jury and cross-examination as the proper tools for determining the reliability of an expert's testimony, the restaurant said, and by affirming it, the Eleventh Circuit created a new, higher standard.

An attorney for Sparta declined to comment Wednesday.

Representatives for Mama Jo's could not immediately be reached for comment Wednesday.

Mama Jo's is represented by Leonardo H. Da Silva, Brian C. Costa, Miguel R. Lara and Christopher A. Martinez of Alvarez Feltman & Da Silva PL.

Sparta is represented by Holly S. Harvey and Jorge Alexander Maza of Hinshaw & Culbertson LLP.

The case is Mama Jo's Inc. v. Sparta Insurance Co., case number 20-998, in the Supreme Court of the United States.

--Additional reporting by Jeff Sistrunk. Editing by JoVona Taylor.

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