By Melissa Angell

Law360 (June 17, 2021, 10:57 PM EDT ) Aspen Specialty Insurance Co. urged the Eleventh Circuit on Thursday to back its win against a Florida steakhouse's COVID-19 business interruption coverage suit, pointing out that property insurance policies are not designed to extend to coverage against pandemics.

The insurer said in its 86-page brief that St. Petersburg, Florida-based steakhouse Rococo Steak LLC is not entitled to insurance coverage under Florida law since the steakhouse did not allege a direct physical loss or damage to its property.

The insurer continued that if courts were to rule that insurers are on the hook for COVID-19 insurance disputes, then assuming such a burden "would threaten insolvency across the industry and deprive policyholders of the coverage for which they actually contracted."

"As this country's insurance commissioners — who obviously stand at a remove from industry interests — have explained, property insurance policies were not designed or priced to provide coverage against national or global pandemics," the insurer wrote in its brief.

The steakhouse's initial complaint was lodged on Oct. 23 and alleged the presence of COVID-19, along with loss of functional space, and structural alteration of the restaurant's surfaces and ambient air caused by the virus. The presence of the virus caused the property to be physically uninhabitable by customers and also caused its function "to be nearly eliminated or destroyed," according to the court documents.

Rococo claimed its October 2019 through October 2020 policy contained coverage for business interruption, extra expenses and civil authority closure orders. The policy contained no virus exclusion and applied to direct physical loss of or damage to covered property, the steakhouse said.

The steakhouse further said that it has suffered direct physical loss or damage to property caused by the coronavirus and resulting civil closure orders. Aspen has wrongly refused to pay for multiple coverages in the eatery's "all risk" commercial insurance policy that should apply to those losses, according to Rococo.

After a lower court ruled in favor of the insurer, the Florida steakhouse appealed the decision in May and criticized the lower court's reliance on an influential opinion in the circuit involving direct physical loss of or damage to property.

Rococo took issue with the judge's citation of an Aug. 18 circuit decision in Mama Jo's Inc. d/b/a Berries v. Sparta Insurance Co ., which affirmed that the insurer did not have to cover a Miami restaurant's lost income and additional cleaning costs due to dust from nearby roadwork, agreeing with a Florida federal judge that the eatery's claimed losses did not result from covered "direct physical loss of or damage to" its property.

The lower court's order said Rococo failed to squarely address the binding Mama Jo's precedent that alleged damage must be actual and physical.

And on Thursday, Aspen outlined that more than 30 state and federal courts in Florida ended up slashing claims for lost income attributed to the pandemic when they applied the Mama Jo's framework.

The steakhouse has only alleged that it lost income and incurred expenses from orders directing businesses to cut nonessential operations as the country scrambled to curb the spread of the virus, the insurer observed.

Aspen continued that Rococo mainly claiming coverage for loss of use of its property, while also attempting to qualify that claim as a direct physical loss or damage to its property, contradicts the policy's language.

"Under Florida law, and consistent with the overwhelming majority of courts to consider the question, the district court correctly held that Rococo failed to state a claim for coverage because Rococo alleged no facts showing that its income losses and extra expenses were caused by 'direct physical loss of or damage to' property," the insurer wrote in its brief.

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

Rococo Steak is represented by Steven H. Osber and Kyle S. Roberts of Conrad & Scherer LLP.

Aspen Specialty Insurance is represented by Yvette Ostolaza, Chandler Rognes and Virginia Seitz of Sidley Austin LLP and Patrick Betar and William S. Berk of Berk Merchant & Sims PLC.

The case is Rococo Steak LLC v. Aspen Specialty Insurance Co., case number 21-10672, in the U.S. Court of Appeals for the Eleventh Circuit.

--Additional reporting by Joyce Hanson. Editing by Jay Jackson Jr.

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