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Law360 (March 12, 2021, 10:26 PM EST ) Restaurants in New Jersey, Delaware, Florida and Washington can't force their insurers to cover COVID-19-related losses because their policies' virus exclusions "unambiguously" bar the claims, a New Jersey federal judge ruled on Friday in tossing their proposed class action.
U.S. District Judge Renée Marie Bumb granted a motion to dismiss filed by AmGUARD Insurance Co. and Republic-Franklin Insurance Co. after finding that the virus exclusion clauses in the property insurance policies issued to The Colby Restaurant Group, BBR Lauderdale LLC and SRG Southcenter LLC extinguish their claims for COVID-19 losses.
The restaurant groups argued that the virus exclusions are intended to apply only in the event of contamination by a bacteria or virus at the insured property, but Judge Bumb said that nothing in the policy suggests that actual contamination is required to trigger the exclusion.
"Plaintiffs offer no compelling argument that the plain language in the virus exclusions is susceptible to two reasonable interpretations," the judge said. "Rather, the language is explicit and plainly excludes from coverage any loss caused by 'any virus … that induces or is capable of inducing physical distress, illness or disease.' Therefore, the court finds that virus exclusions are unambiguous."
The restaurants, which were forced to shut down early in the pandemic due to government orders, filed suit on May 15 after their claims filed with the insurers were denied.
Their property insurance policies have nearly identical virus exclusion clauses that state the insurance companies "will not pay for loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease."
The restaurants tried arguing that the government closure orders, and not the virus itself, were the proximate cause of the losses they sustained, but Judge Bumb said that argument has already been rejected by courts, because the virus and the orders are inextricably connected.
Attorneys for the parties did not respond immediately to requests for comment.
The restaurants are represented by Christopher A. Seeger of Seeger Weiss LLP and Lindsey H. Taylor and James E. Cecchi of Carella Byrne Cecchi Olstein Brody & Agnello PC.
The insurance companies are represented by Susan M. Leming of Brown & Connery LLP.
The case is Colby Restaurant Group Inc. et al. v. Utica National Insurance Group et al., case number 1:20-cv-05927, in the U.S. District Court for the District of New Jersey.
--Editing by Nicole Bleier.
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