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Law360 (March 24, 2021, 6:59 PM EDT ) Fireman's Fund Insurance Co. and another insurer don't have to cover coronavirus-related losses for the owners of Grassfield's and Jimmy's Steer House restaurants in Massachusetts, a federal judge ruled Wednesday.
U.S. District Judge Richard G. Stearns said the owners of the family-style and upscale eateries couldn't show a "direct physical loss of or damage to" their properties from the pandemic or related government shutdowns, according to the ruling.
"The phrase 'direct physical loss of or damage' does not encompass transient phenomena of no lasting effect, much less real or imagined reputational harm," the judge said, finding the restaurant owners can't show coverage was owed by Fireman's Fund and Allianz Global Risks United States Insurance Co.
Allan Kanner of Kanner & Whiteley LLC, counsel for the restaurant owners, told Law360 on Wednesday he was grateful the court gave a prompt ruling because a delay would only harm his clients.
"We obviously disagree with the substance of the court's ruling, which, among other faults, fails to adequately address how the highest Massachusetts court would have ruled," he said. "The Massachusetts litigation is still in the first inning, and we await the rulings of higher courts, especially higher state courts."
This is the fifth Massachusetts ruling on the issue, according to a database maintained by the University of Pennsylvania Carey Law School. Three other Massachusetts federal suits over business interruption losses from the pandemic were dismissed with prejudice, and a fourth suit in state court was also tossed.
The restaurant owners led by American Food Systems Inc. filed an amended complaint in January, saying the insurers wrongfully denied coverage for losses resulting from the COVID-19 pandemic. The owners brought claims for breach of contract, bad faith and violation of the Massachusetts Unfair Trade and Practices Act.
The owners argued there was a risk of the coronavirus being present at their restaurants at all times. But the insurers said this was "a kitchen sink approach" to seeking coverage.
In Wednesday's ruling, Judge Stearns tossed their lawsuit, finding that a "direct physical loss" doesn't encompass a viral infestation.
The restaurant owners can't establish coverage was triggered, Judge Stearns held, saying the policy doesn't cover "a mere threat" to property if there isn't any actual physical damage to the property.
Earlier this month, other Massachusetts restaurants had their suits over pandemic-related losses kicked. Two Japanese-style and Spanish and Portuguese seafood restaurant owners couldn't show there was any physical loss or damage to their locations caused by the pandemic or the government shutdown orders.
And another Massachusetts federal judge ruled a seafood restaurant chain couldn't show the coronavirus was present at 32 of its properties and caused a "direct physical loss or damage to" its properties.
Representatives for Fireman's Fund and Allianz didn't respond to requests for comment.
The restaurant owners are represented by J. Tucker Merrigan and Thomas T. Merrigan of Sweeney Merrigan Law LLP and Allan Kanner and Cynthia St. Amant of Kanner & Whiteley LLC.
The insurers are represented by Bruce Falby and Jamie Kurtz of DLA Piper.
The case is American Food Systems Inc. et al. v. Fireman's Fund Insurance Co. et al., case number 1:20-cv-11497, in the U.S. District Court for the District of Massachusetts.
--Additional reporting by Joyce Hanson. Editing by Daniel King.
For a reprint of this article, please contact reprints@law360.com.
