In his order, U.S. District Judge Federico A. Moreno said the "weight of federal court rulings is against" Town Kitchen LLC's argument that its inability to operate because of the effects of the coronavirus and various government responses constitute physical losses under the restaurant's commercial property insurance policy.
The restaurant also argued that the high risk of virus transmission inside its business made it unusable, while the presence of the virus on tables and countertops physically damaged the property. But, as other courts have held, Judge Moreno said the economic losses happened to be caused by something physical, rather than a direct physical loss.
The judge said the key difference between Town Kitchen's loss of use theory and something clearly covered by the policy — like a hurricane — is that the property didn't change. For the property to be used again, no repairs or changes can be made, the outside world must change.
"Under their loss of use theory, Town Kitchen is attempting to shoehorn their losses stemming from the inability to use their restaurant at full capacity into something covered by their insurance policy merely because they are caused by a physical virus — but coronavirus particles damage lungs, they do not damage buildings," Judge Moreno said.
The judge likened the restaurant's economic losses to a zoning change, loss of liquor license or the University of Miami Hurricanes football championship parade blocking the road, saying intangible business operations are affected but the physical structure remains the same.
The judge also rejected Town Kitchen's argument that the virus was physically present inside the restaurant, again saying there was no physical damage to the restaurant, according to the order. He said the way to repair the problem is to disinfect the restaurant's tables and other surfaces.
"At this point in the pandemic, it is widely accepted that life can go on with hand sanitizer and disinfecting wipes," Judge Moreno said. "Indeed, Town Kitchen has continued to operate a takeout business from the very premise they argue has suffered direct physical loss."
The judge dismissed Town Kitchen's breach of contract suit, finding that the restaurant hasn't shown that the insurers — including underwriters at Lloyds, Indian Harbor Insurance Co. and HDI Global Specialty SE — improperly denied its insurance claim.
Representatives for the parties did not immediately respond to requests for comment Monday.
Judges around the country for the most part have been tossing these COVID-19 insurance coverage cases, with many cases going up the ladder to the appellate realm.
In February, a New York state judge ruled that a Great American Insurance unit doesn't have to cover a movie theater's losses, finding that the direct physical loss or damage language at issue in the policy requires a tangible physical alteration to the policyholder's property, which did not occur.
A Pennsylvania federal judge tossed a shuttered South Carolina restaurant's suit against Pennsylvania National Mutual Insurance Co. for much the same reason.
On Friday, a California federal judge freed a Chubb insurance unit from having to cover a San Francisco concert operating company's losses, while a Nevada federal judge tossed a suit brought by a Las Vegas breakfast chain, and an Ohio federal judge threw out a suit brought by a real estate management company.
But two Philadelphia federal judges issued differing opinions on a pair of coverage lawsuits, with one judge ruling that a policy's "virus exclusion" bars coverage and the other deferring the issue to state courts.
Last month, Los Angeles restaurant Plan Check asked the Ninth Circuit to reverse a district court's decision to toss its proposed class action seeking coverage from AmGuard Insurance Co. for losses stemming from COVID-19 shutdown orders.
And a group of minor league baseball teams sought to revive their suit against their three Nationwide insurers, after an Arizona federal judge granted a bid by National Casualty Co., Scottsdale Indemnity Co. and Scottsdale Insurance Co. to dismiss the case.
Town Kitchen is represented by Jason S. Mazer of Cimo Mazer Mark PLLC, Michael E. Criden, Kevin B. Love and Lindsey C. Grossman of Criden & Love PA and Linda P. Nussbaum of Nussbaum Law Group PC.
The underwriters and the insurance companies are represented by John D. Mullen, Sarah B. Van Schoyck and Jason A. Pill of Phelps Dunbar LLP.
The case is Town Kitchen LLC v. Certain Underwriters at Lloyd's London et al., case number 1:20-cv-22832, in the U.S. District Court for the Southern District of Florida.
--Additional reporting by Jeff Sistrunk, Daphne Zhang, Matthew Santoni and Mike Curley. Editing by Orlando Lorenzo.
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