By Bill Wichert

Law360 (May 3, 2021, 3:03 PM EDT ) A Chubb unit has told a New Jersey federal court that a virus exclusion and a lack of physical damage to a Garden State restaurant should spell the end of the eatery's proposed class action over the insurer's refusal to cover losses related to the COVID-19 pandemic.

Less than two weeks after making the same arguments against another New Jersey restaurant's class claims over such coverage, Indemnity Insurance Co. of North America urged the court on Friday to toss Beniak Enterprises Inc.'s suit, saying its theory of coverage has been rejected by every federal court to have considered it in the state.

Those courts and others across the country "have endorsed the nearly unanimous view that COVID-19 does not cause direct physical loss of or damage to property sufficient to trigger coverage," IINA said in a brief on its motion for judgment on the pleadings.

"As in those other unsuccessful cases, Beniak's complaint merely claims that the coronavirus temporarily impaired the restaurant's intended use," IINA said. "But even if such conclusory allegations were proven, they do not establish any 'direct physical loss of or damage to' the property, as required by the policy and New Jersey law."

The virus exclusion in Beniak's policy also prohibits any coverage for the restaurant, IINA argued. That clause "expressly bars coverage for any loss or damage caused by or resulting from any 'virus … that induces or is capable of inducing physical distress, illness[,] or disease,'" the company said.

Beniak, which does business as Benito Ristorante in Union, New Jersey, claimed in its complaint that the exclusion does not apply since its losses were caused by "precautionary measures taken by the State of New Jersey to prevent the spread of COVID-19 in the future, not because coronavirus was found in or on plaintiff's insured property."

But judges applying New Jersey law have concluded that a virus exclusion is applicable under such circumstances, IINA said.

"Beniak's theory seems to be that the orders, not the virus, caused its losses, but — as several courts have already recognized in the COVID-19 context — that argument is foreclosed by New Jersey law, because the orders themselves resulted from the virus," the insurer said.

The company made that identical point on April 21 in seeking to dismiss similar class claims from Truhaven Enterprises Inc., which does business as Fiorino Ristorante in Summit, New Jersey.

Both Italian eateries have sought coverage under respective IINA policies for the financial hits they took after Gov. Phil Murphy limited restaurants to takeout and delivery orders as part of the state's efforts to combat the spread of COVID-19. The governor has since permitted outdoor and indoor dining with certain restrictions.

The policies provide coverage for business income losses, extra expenses and losses due to actions of civil authorities.

Just as with Truhaven, IINA on Friday argued that business income and extra expense coverage — which applies to the "direct physical loss of or damage to" property — was not available since the restaurant was not physically altered.

The company again relied on the Third Circuit's 2002 opinion in Port Auth. of N.Y. & N.J. v. Affiliated FM Ins. Co. , which affirmed that, "under New Jersey law, direct physical loss or damage requires an actual, tangible alteration to property," according to IINA's brief.

"Just as in other cases dismissed on the pleadings, Beniak's complaint nowhere asserts what physical damage occurred, how the physical damage occurred, when the physical damage occurred, and what, if anything, needs to be repaired, replaced, or rebuilt as a result," the brief states.

Beniak also failed to meet the requirements for civil authority coverage, which applies when "the action of a civil authority prohibits access to the insured property due to damage to property within one mile thereof," according to IINA.

"The orders cited by Beniak were issued 'to mitigate the COVID-19 pandemic,' not to respond to any property damage," IINA said. The eatery further has not alleged that the orders prohibited access to the business, the company said.

Counsel for the parties did not immediately respond to requests for comment Monday.

Beniak Enterprises is represented by James E. Cecchi and Lindsey H. Taylor of Carella Byrne Cecchi Olstein Brody & Agnello PC, Christopher A. Seeger and Stephen A. Weiss of Seeger Weiss LLP, and Samuel H. Rudman, Paul J. Geller and Stuart A. Davidson of Robbins Geller Rudman & Dowd LLP.

IINA is represented by Daren S. McNally, Barbara M. Almeida and Meghan C. Goodwin of Clyde & Co. US LLP, and Richard B. Goetz, Daniel M. Petrocelli, Allen W. Burton and Leah Godesky of O'Melveny & Myers LLP.

The case is Beniak Enterprises Inc. d/b/a Benito Ristorante v. Indemnity Insurance Co. of North America, case number 2:20-cv-05536, in the U.S. District Court for the District of New Jersey.

--Editing by Aaron Pelc.

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