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Law360 (April 19, 2021, 8:33 PM EDT) -- A New Jersey wedding venue told a federal court Monday its insurance policy's virus exclusion doesn't allow a Liberty Mutual unit to escape class claims for denying coverage related to the COVID-19 outbreak, arguing the catering facility's losses were caused by government orders and not the novel coronavirus.
Nanina's In The Park called on the court to knock down Ohio Security Insurance Co.'s bid to defeat its proposed class action, saying the provision did not bar the banquet hall's coverage when its losses stemmed from orders issued by Gov. Phil Murphy that forced the business to close its doors in an attempt to curb the spread of COVID-19.
"The efficient proximate cause of Nanina's losses was the closure orders, not a virus," according to the facility's brief in opposition to the insurer's motion for judgment on the pleadings. "This is made plain by the fact that, had the closure orders never existed, but the virus still did, Nanina's would never have closed."
Amid a series of decisions in insurers' favor over similar clauses, Ohio Security has said Nanina's is not entitled to coverage since its policy's virus exclusion prohibits coverage for "'loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of causing physical distress, illness or disease.'"
In challenging that argument, Nanina's on Monday stressed that the provision does not include an "anti-concurrent cause clause." A virus exclusion with such a clause "will exclude a loss if a virus contributes in any way to the loss, or is anywhere in the chain of events causing the insured's loss," the facility said.
Without that clause in its virus exclusion, the "efficient proximate cause rule applies," Nanina's said. COVID-19 "may have started the chain of events moving, but the reason that Nanina's closed its business is that it was ordered to do so by the state, not because of the existence of coronavirus," the facility said.
"The coronavirus existed in the environment for weeks prior to the intervention by the state," Nanina's said. "Neither Nanina's nor any other business closed and suffered business interruption losses via the mere existence of coronavirus and Nanina's would not have closed but for the closure orders."
The facility also blasted the rationale of the decisions cited by Ohio Security in seeking to enforce the virus exclusion.
For example, the insurance company noted that U.S. District Judge Freda L. Wolfson "performed an efficient proximate causation analysis for a COVID-19 business interruption insurance claim with an identical virus exclusion, and held that it precluded coverage," referring to her Feb. 10 opinion in Causeway Automotive LLC et al. v. Zurich American Insurance Co.
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The judge rejected the argument that Murphy's orders were the efficient proximate cause of the losses suffered by a group of car dealerships, saying they "were issued for the sole reason of reducing the spread of the virus that causes COVID-19 and would not have been issued but for the presence of the virus in the state of New Jersey."
But Nanina's asserted that "an intellectually honest assessment of the legal landscape demonstrates that all of Ohio Security's authority ultimately rely upon cases where courts have erroneously applied the reasoning for policies with anti-concurrent cause clauses to policies without anti-concurrent cause clauses."
"If the court weeds out all of the cases that ultimately rely upon decisions based upon policies with anti-concurrent cause clauses, which is every case cited by Ohio Security, Ohio Security's position falls completely apart," Nanina's said.
The venue also took aim at Ohio Security's position that the business cannot receive coverage under its policy covering "'direct physical loss of or damage to'" property because its premises did not suffer any physical damage.
Nanina's contended it suffered a "'direct physical loss'" since, as a result of Murphy's orders, the business "cannot use its premises for its intended purposes, which is holding large gatherings for events such as weddings, banquets and the like."
"The policy insures 'direct physical loss of or damage to' property. Ohio Security contends that this language requires some damage to the property," the facility said. "However, that cannot be because 'loss' and 'damage' are separated by 'or', so they must be different things."
Nanina's is represented by Samuel H. Rudman, Paul J. Geller and Stuart A. Davidson of Robbins Geller Rudman & Dowd LLP, Christopher A. Seeger and Stephen A. Weiss of Seeger Weiss LLP and James E. Cecchi and Lindsey H. Taylor of Carella Byrne Cecchi Olstein Brody & Agnello PC.
Ohio Security is represented by Steven L. Penaro, Daniel F. Diffley, Tiffany L. Powers and Kara F. Kennedy of Alston & Bird LLP.
The case is Caterer's In The Park LLC t/a Nanina's In The Park v. Ohio Security Insurance Co., case number 2:20-cv-06867, in the U.S. District Court for the District of New Jersey.
--Editing by Janice Carter Brown.
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