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Law360 (March 29, 2021, 11:23 PM EDT ) A New Jersey federal judge on Monday ruled that the owner of an ice cream restaurant is not entitled to coverage for pandemic-related business interruption losses, finding that a clear virus exclusion in the shop's policy forecloses its insurance claim.
In a 12-page opinion, U.S. District Judge Joseph H. Rodriguez determined that the virus exclusion in Merchants Mutual Insurance Co.'s policy is enough to ax Benamax Ice LLC's suit.
"The 'Virus or Bacteria' exclusion applies to the coverage at issue in this matter and is a complete defense to coverage compelling the dismissal of plaintiff's complaint on this ground alone," the judge wrote in his opinion.
Benamax, owner of an ice-cream restaurant in Westmont, New Jersey, sued Merchants last year, seeking coverage for losses due to COVID-19 and state-mandated closures. The restaurant said it was forced to close due to government orders.
Benamax said in its complaint that restaurant closures as a result of the pandemic resulted in direct physical loss of or damages to property since Benamax's premises were rendered unusable.
But Merchants argued that the policy's civil authority coverage does not apply because the ice cream store ignored Gov. Phil Murphy's order that restaurants could stay open by offering take-out and delivery. The ice cream restaurant chose not to provide those services, so it cannot allege that it lost access to its property due to government orders, Merchants said.
Merchants pointed out during a bid to ax the suit that two courts have specifically held that the COVID-19 pandemic does not cause "physical loss of or damage to property," and that the terms of the commercial property policies in the two cases are "strikingly similar" to what it issued to Benamax.
Merchants said the policyholder failed to show physical damage or that it lost access to its property due to state-mandated closures. Even if it had successfully shown physical damage, all of its claimed losses fall "squarely" within the policy's virus exclusion, the carrier said in a brief.
On Monday, Judge Rodriguez ruled in the insurer's favor and axed the suit, finding that the ice cream shop's coverage bid fell under the exclusion.
"The Coronavirus is a 'virus' and courts have treated it and the measures to contain it as coming within a virus or bacteria exclusion," the judge wrote in his opinion.
The ruling arrives just weeks after a luxury New York City hotel sued its insurer in New York state court, arguing it was wrongfully denied coverage for pandemic-related losses. In that suit, the hotel quoted former President Donald Trump, who implied insurers should pay virus claims if pandemics aren't specifically excluded from policies.
Counsel for parties could not be immediately reached for comment.
Benamax is represented by Robert W. Williams of Mattleman Weinroth & Miller PC.
Merchants Mutual Insurance is represented by Nicole M. Crowley of Goldberg Segalla LLP.
The case is Benamax Ice LLC v. Merchants Mutual Insurance Co. et al., case number 1:20-cv-08069, in the U.S. District Court for the District of New Jersey.
--Editing by Regan Estes.
For a reprint of this article, please contact reprints@law360.com.
