Cajun restaurant Henry's Louisiana Grill Inc. and its event space Henry's Uptown LLC — located in Acworth, Georgia — asked the appellate court to reverse U.S. District Judge Thomas W. Thrash Jr.'s ruling dismissing their suit seeking coverage under a business owners property policy issued by Nationwide unit Allied Insurance Co. of America.
In a 44-page brief, Henry's argued that the district court had gone against Georgia law by not taking the insurance policy's ambiguity about what "loss of property" means in the most favorable light for Henry's when considering the insurer's dismissal bid. The district court emphasized that the property was not physically altered or damaged, but Henry's countered that the policy should cover loss of access to their property.
"Even if the language of the policy, which does not define 'physical loss of' property, is ambiguous on this count, the complaint survives a motion to dismiss because Georgia law requires that ambiguous language be construed against the insurer as drafter," Henry's said in its brief.
Henry's alleges it should be covered for the business it lost while closed under a March 14 state executive order that declared a public emergency due to the COVID-19 pandemic. Nationwide denied coverage due to an exception for a virus or bacteria, although there was no virus present at the businesses, according to the brief.
Henry's also argued that if the Eleventh Circuit does not send the dispute back to a lower court, it should send it to the Supreme Court of Georgia. Henry's asserted that Georgia courts have not yet deemed what physical loss of property means for virus-related business losses like Henry's and that the state high court should weigh in to settle this new kind of dispute.
Specifically, according to the brief, Henry's would like Georgia's highest court to consider two questions: whether physical loss or damage to property includes losing the ability to use the restaurant and event space, and if the pandemic-related executive order should trigger insurance coverage under a portion of the policy that covers income losses and extra expense caused by government action or civil authority.
"When the highest court in the state has yet to rule on an issue, district courts within this circuit may certify questions 'to offer the state court the opportunity to interpret or change existing law,'" Henry's said in its brief. "The sole reason for which the district court held that Henry's failed to state a claim rests on interpretation of policy language yet to be considered by the Georgia Supreme Court."
In June, Henry's filed its complaint in the Superior Court of Cobb County, but Nationwide removed it to federal court in July due to diversity of citizenship, according to court documents.
Judge Thrash dismissed the suit in October, pointing to the Georgia Court of Appeals case AFLAC Inc. v. Chubb & Sons Inc.
, which dealt with whether computer system upgrades required by "Y2K" — the onset of the year 2000 — were covered by the insurance policy that covered physical loss or damage to property, according to the brief.The district judge found that the executive order had no direct impact on Henry's property as required by the business income provision in the policy.
The district judge said then that the restaurant did not have to make any changes to the restaurant and event space. Judge Thrash further opined that a ruling in favor of Henry's would "potentially make an insurer liable for the negative effects of operational changes resulting from any regulation or executive decree, such as a reduction in a space's maximum occupancy."
In its brief, Henry's also pushed back on the district court's ruling that the statewide executive order was not an action of civil authority that triggered insurance coverage.
"There is also no Georgia authority directly on point to determine whether executive orders declaring public health emergencies constitute an act of civil authority sufficient to trigger civil authority coverage," Henry's said.
Henry's attorney, James J. Leonard of Barnes & Thornburg LLP, declined to comment.
Nationwide and attorneys for Nationwide did not immediately respond to requests for comment.
Henry's Louisiana Grill and Henry's Uptown are represented by James J. Leonard of Barnes & Thornburg LLP.
Nationwide is represented by W. Shawn Bingham of Freeman Mathis & Gary LLP.
The case is Henry's Louisiana Grill Inc. et al. v. Allied Insurance Co., case number 20-14156, in the U.S. Court of Appeals for the Eleventh Circuit.
--Additional reporting by Jeff Sistrunk. Editing by Daniel King.
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