U.S. District Judge Thomas W. Thrash tossed the lawsuit on Tuesday, saying that Restaurant Group Management LLC and a group of related companies was not able to show the virus caused any "direct physical loss of or damage to" its restaurants' properties, a precondition for coverage under the policy.
Among other things, the restaurant group argued that it had to change table arrangements and reduce seating capacity to meet social distancing recommendations, which in turn increased the cost of doing business and cut into its revenues. But Judge Thrash on Tuesday rejected the contention that the changes or property contamination from the virus caused a direct physical loss under the insurance policy.
"Neither of these claimed losses triggers coverage under Georgia law," Judge Thrash said.
The eatery owners voluntarily chose to rearrange their tables and seats to prevent the threat of the outbreak, and the virus itself did not have any direct effects on the restaurants' properties, he added.
Additionally, the judge said, "the plaintiffs' contamination allegations do not indicate an actual physical change occurred on the premises as the result of COVID-19," referring to a heavily cited ruling in Mama Jo's v. Sparta Insurance Co.
, in which the Eleventh Circuit held that policyholders must show their properties required physical repairs to constitute direct physical loss.In January, Mama Jo's Inc., which runs a Miami restaurant called Berries in the Grove, asked the U.S. Supreme Court to overturn the Eleventh Circuit's decision, saying that an answer to the question of what defines "physical loss" at the heart of the suit is critical given the hundreds of COVID-19-related suits facing the same issue.
The Georgia restaurant group is reportedly planning to close Joe's on Juniper and Einstein's, a sister restaurant in Midtown Atlanta, in June when their parent company sells the real estate. The company also runs six locations of a sports bar concept called Hudson Grille.
On Tuesday, Judge Thrash said although "some courts have found physical loss even without tangible destruction, the line of cases requiring tangible injury to property is more persuasive."
Moreover, the policy's business income provision is not triggered as the restaurant management company failed to sufficiently demonstrate revenue loss, the judge found. The company never showed how much they have spent to avoid and manage their income loss, according to the ruling.
"The plaintiffs' complaint does not identify what expenses they incurred to reduce the amount of lost business income," the judge added. "Without any allegations detailing the expenses incurred for the purpose of reducing lost business income, the plaintiffs cannot allege coverage under the provision."
The ruling is the latest in a string of losses for policyholders in the Peach State. Judge Thrash became the seventh judge in Georgia to dismiss a policyholder's COVID-19 case, according to a database maintained by the University of Pennsylvania Carey Law School. In the 267 court decisions issued so far on more than 1,500 COVID-19 coverage disputes, the majority of judges have sided with insurers and dismissed policyholders' suits.
Last week, a Georgia federal judge ruled that a daycare center cannot get insurance coverage for its pandemic-related revenue loss, holding that the center failed to show the COVID-19 virus ever entered its facility. Earlier this month, a Georgia dental practice had its lawsuit extracted by a federal judge who found Cincinnati Insurance Co. doesn't have to cover the practice's COVID-19-related losses because there wasn't any direct physical loss or damage tied to its suspension of non-emergency procedures.
In January, an Atlanta-area law firm lost its bid to get coverage for losses from COVID-19 stay-at-home orders after a Georgia federal judge found the office had not sustained the sort of direct physical loss or damage required by its policy with a unit of The Hartford.
Counsel for the parties could not be immediately reached for comment.
The restaurant management company is represented by J. Robert Persons and William Thomas Lacy Jr. of Lindsey & Lacy PC.
Zurich is represented by Anthony Wyatt Morris and Robin Needham Johnson of Akerman LLP.
The case is Restaurant Group Management LLC et al v. Zurich American Insurance Company, case number 1:20-cv-04782, in the U.S. District for the Northern District of Georgia
--Editing by Ellen Johnson.
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