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Law360 (June 4, 2021, 8:33 PM EDT ) A Connecticut federal judge has freed an insurance unit of The Hartford from having to pay for a New York hospitality group's pandemic-related losses, holding that the group's losses from government closure orders do not trigger the policy's civil authority coverage.
U.S. District Judge Vanessa L. Bryant on Thursday granted Hartford Fire Insurance Company's bid to escape a proposed class action lodged by New York-based SA Hospitality Group LLC. The judge tossed the entire suit, saying the group failed to show how the government orders caused any property damage covered by the policy.
"Every trial court in this circuit that has considered the issue has concluded that civil authority orders curtailing business operations in response to the COVID-19 pandemic do not constitute 'direct physical loss of or physical damage to' property under New York law." the judge said. "SA Hospitality has not pointed to any New York case that reached a contrary conclusion."
Last October, Hartford urged the Connecticut federal court to ax the proposed class action, arguing the policy expressly excludes virus loss and the group failed to allege direct physical damage. The insurer said SA Hospitality was not able to show any particular physical damage or loss on its covered property or that government closure orders prohibited access to its restaurants.
SA Hospitality, which owns and operates restaurants and other businesses in New York and Florida, sued Hartford last July, claiming the group and its 17 subsidiaries suffered physical damage from the pandemic covered under its all-risk policy with the insurer. Hartford had denied the group's claim for coverage months earlier in April, asserting the group's alleged losses were excluded by the bacteria and virus exclusion.
On Thursday, Judge Bryant sided with the carrier, saying SA Hospitality was not able to show any specific property that was lost or damaged, and the group failed to allege its access was prohibited by the government orders.
The policy unambiguously requires SA Hospitality to show a "demonstrable physical harm" to its premise rather than a forced closure due to a government order unrelated to its property, the judge said. The government orders were issued to ensure social distancing and slow the spread of COVID-19 but were not carried out because of physical damage in the "immediate area" of the group restaurants, she added.
"SA Hospitality does not present any authority suggesting that the language in the civil authority provision should be interpreted more expansively than the identical condition contained in the insuring agreement of the business interruption section," Judge Bryant said.
Representatives of the parties could not be immediately reached for comment Friday.
SA Hospitality Group is represented by Christopher Ayers of Seeger Weiss LLP.
Hartford is represented by Timothy A. Diemand of Wiggin and Dana LLP and Sarah D. Gordon, Charles Michael and Meghan Newcomer of Steptoe & Johnson LLP.
The case is SA Hospitality Group LLC et al. v. Hartford Fire Insurance Co., case number 3:20-cv-01033, in the U.S. District Court for the District of Connecticut.
--Editing by Janice Carter Brown.
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