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Law360 (May 24, 2021, 7:00 PM EDT ) The owners of Italian restaurants in St. Louis can't tap into coverage with The Cincinnati Insurance Co. for business interruption losses, a federal judge has ruled, saying the presence of the coronavirus doesn't cause direct physical loss or damage to property.
Del Pietro Restaurants — owners of Sugo's Spaghetteria, Babbo's Spaghetteria, and Via Vino Enoteca — can't rely on a Western District of Missouri decision, Studio 417 v. Cincinnati Ins. Co., to support coverage efforts for losses tied to government closure orders, U.S. District Judge Sarah E. Pitlyk said on Friday, calling that decision an "outlier."
"[The insurers] offer numerous cases, in Missouri and across the nation, in which courts have denied coverage under similar policies because the COVID-19 virus does not cause physical loss or damage to property," the judge said, noting physical alteration to property is needed to trigger coverage.
Del Pietro Restaurants filed suit in St. Louis County Circuit Court, which was removed to federal court in June 2020, alleging Cincinnati and its affiliates must cover the losses caused by government orders to shut down businesses to curb the spread of the coronavirus. The insurers asked for dismissal.
In Friday's ruling, Judge Pitlyk tossed the suit, finding the restaurants don't allege any physical alteration to their properties caused by the coronavirus. Rather, they allege the virus — a physical substance — caused the properties' loss of use, which is enough for a direct physical loss or damage, the judge said.
But Judge Pitlyk distinguished the restaurants' reliance on August's Studio 417 ruling, which allowed a group of hair salons and restaurants to proceed with a proposed class action against Cincinnati. In Studio 417, the court rejected Cincinnati's argument that a physical loss required a physical alteration to property.
Judge Pitlyk disagreed, finding direct physical loss or damage, under Missouri law, requires a property's physical alteration. Even if the coronavirus was present at the restaurants rather than a communitywide spread of the virus, the judge ruled the virus doesn't physically change property.
Richard M. Elias of Elias LLC, counsel for the restaurants, told Law360 on Monday that his clients were disappointed and disagreed with the decision. They are currently determining the next steps, Elias said.
A representative for Cincinnati said in a statement to Law360 that the insurance company agreed with Judge Pitlyk's decision that the coronavirus didn't cause a direct physical loss — a prerequisite for coverage — because the virus doesn't physically alter the restaurants' property.
"We recognize the challenges facing many small businesses. We have been, and continue to be, committed to doing our part to support the families and businesses in our agents' communities, including helping them to proactively manage risks and promptly paying covered claims," the representative said.
Since Studio 417, insurers have successfully had seven out of 10 business interruption suits in Missouri federal courts tossed, according to data from the University of Pennsylvania's COVID Coverage Litigation Tracker. Cincinnati has scored dismissals nationwide in 35 out of all 49 cases against the insurer, according to the same data.
Two weeks ago, a Missouri federal judge likewise distinguished Studio 417 and tossed a taco restaurant chain's COVID-19 business interruption suit. The government closure orders to curb the pandemic didn't cause a physical loss or damage triggering coverage with Cincinnati, the judge said in that case.
Del Pietro Restaurants is represented by Richard M. Elias of Elias LLC.
Cincinnati is represented by Brian K. McBrearty and Dennis M. Dolan of Litchfield Cavo LLP.
The case is MMMMM DP LLC et al. v. The Cincinnati Insurance Co. et al., case number 4:20-cv-00867, in the U.S. District Court for the Eastern District of Missouri.
--Additional reporting by Jeff Sistrunk. Editing by Bruce Goldman.
For a reprint of this article, please contact reprints@law360.com.
