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Law360 (June 11, 2021, 3:31 PM EDT ) An insurer said Thursday it's too soon for a Boston hotel investor group to declare it's owed up to a year of coverage for losses tied to a COVID-19 superspreader event, telling a California federal judge that discovery could cap the coverage period at two days.
Endurance American Specialty Insurance Co. urged U.S. District Judge Cormac Joseph Carney not to reject its argument that Sunstone Hotel Investors Inc.'s coverage expired after the two days it took to disinfect the Marriott Boston Long Wharf following a February 2020 Biogen conference that was later linked to 300,000 coronavirus infections worldwide.
The investors, who are seeking $40 million for business losses the Marriott allegedly sustained when it was forced to close the hotel after the conference, asked Judge Carney on May 17 to rule that its insurance policy extended to cover the entire time its operations were interrupted by the pandemic.
But Endurance said Thursday it deserves a chance to unearth evidence showing the bulk of the hotel's losses were totally unrelated to the Biogen conference and therefore excluded under the policy's "biological agent conditions" provision.
"When discovery is conducted, Endurance could show that the interruption period ended when the presence of the virus at the Marriott Boston Long Wharf was no longer a source of the interruption to operations, even if operations subsequently remained suspended for other reasons," the insurer said.
Endurance said with the right evidence, it could prove the hotel remained closed due to noncovered factors, such as decreased demand in the hospitality industry or state and local ordinances issued to prevent the spread of the virus.
The insurer noted that government-mandated closures are specifically excluded from coverage by language in the biological agent policy that says the coverage period ends when infections are no longer the direct cause of business interruption, "even if operations cannot resume at the scheduled location for regulatory reasons."
"Because Endurance could develop facts showing that the presence of the virus at, upon or within the Marriott Boston Long Wharf was no longer a source of the interruption to operations after a certain number of days — and that regulatory reasons were what prevented operations from resuming — Endurance is entitled to discovery on this issue," the insurer said.
Endurance added that the investors' motion inappropriately asks for an early win by relying on facts that are still the subject of dispute, such as when attendees at the Biogen conference tested positive for COVID-19 and to what degree the Marriott's operations still remain limited.
It also said the investors' motion wrongly introduces new allegations about the science behind COVID-19, such as that the coronavirus is not adequately killed off by surface disinfection. The insurer said because that question is still up for debate, it must be addressed by scientific experts during discovery.
The investors filed suit in November seeking coverage for losses tied to a conference that Cambridge-based biotech company Biogen hosted at the Marriott, which led to the country's first superspreader event and forced the hotel to shut its doors.
Endurance moved to toss the suit in January, saying it had no duty to provide benefits because the investors had not provided a required $100,000 retainer for cleanup cost coverage.
Judge Carney rejected that argument in March, saying the investors' policy gave them "reasonable expectations" that their business interruption losses would be covered, even if they did not have significant cleanup costs.
Counsel for Endurance and the investors did not immediately respond to requests for comment Friday.
Sunstone Hotel Investors is represented by Kirk A. Pasich and Jeffrey L. Schulman of Pasich LLP.
Endurance is represented by Zoheb Noorani and Richard Blair Goetz of O'Melveny & Myers LLP.
The case is Sunstone Hotel Investors Inc. v. Endurance American Specialty Insurance Co., case number 8:20-cv-02185, in the U.S. District Court for the Central District of California.
--Additional reporting by Eli Flesch and Melissa Angell. Editing by Stephen Berg.
For a reprint of this article, please contact reprints@law360.com.
