National Fire said that instead of what it actually purchased, the eatery in its proposed class action suit wants coverage for actions taken by state and local governments in response to a pandemic and "desperately" asks the court to believe that the virus is "ubiquitous," while failing to show any of its staff or visitors tested positive for COVID-19.
The insurer said that Town & Country Bar and Grill of New Castle, Pennsylvania, wrongly believed that government orders were the cause of "direct physical loss," when they are just "pieces of paper." The tavern's alleged loss was caused by the pandemic, and the virus "may cause death or lung damage" but not property damage, the insurer said.
"The requirement of actual property damage is a vital underwriting requirement for business income coverage. If this requirement is eliminated by judicial fiat, as plaintiff desires, it would lead to vastly greater exposures than were ever intended to be underwritten," National Fire said in the brief.
The carrier added that although the restaurant alleges "awareness on the part of both state and local governments that COVID-19 causes loss or damage to property," government executive orders do not state that COVID-19 has been present at the restaurant. And that access was never fully prohibited by civil authority orders since the eatery was offering take-out service the whole time, the insurer said.
National Fire also argued that the restaurant's bid to invoke regulatory estoppel of the policy's virus exclusion is "fatally defective," as the carrier has never changed its position to bar virus-related losses. The eatery previously argued that the insurer should be barred from applying the virus exclusion because industry trade groups made false statements to regulators regarding the exclusion in 2006.
"A change in position is the critical element for regulatory estoppel," National Fire said. "It is not an element of regulatory estoppel that the original (first) statements were false ... There is zero controlling legal authority that plaintiff may allege a false statement in lieu of alleging a change in position."
National Fire's brief cited a recent statement from Pennsylvania Insurance Commissioner Jessica Altman that business interruption insurance will only pay when there is a physical loss. It is not "designed or priced to cover communicable diseases, such as COVID-19", and the policies usually contain clear exclusions.
Representatives for the parties could not be immediately reached for comment.
Town & Country is represented by Gary F. Lynch, R. Bruce Carlson and Kelly K. Iverson of Carlson Lynch LLP.
Berkshire Hathaway and National Fire are represented by Robert L. Byer, Julie S. Greenberg and Damon N. Vocke of Duane Morris LLP.
The case is 1 S.A.N.T. Inc. v. Berkshire Hathaway et al., case number 2:20-cv-00862, in the U.S. District Court for the Western District of Pennsylvania.
--Editing by Michael Watanabe.
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