Dorothy Atkins | August 14, 2020

A steakhouse chain with more than 50 restaurants around the country has hit Zurich American Insurance Co. with a lawsuit in Illinois state court, alleging the Swiss insurance giant broke their contract by refusing to cover business losses caused by the pandemic, even though the chain paid for premium coverage.

In a 23-page complaint filed Aug. 12, Firebirds International LLC argued that the coronavirus poses an “imminent threat” to each of its 54 “Wood Fired Grill” restaurants, and since the spring, state-mandated closures have ravaged its business.

The Charlotte, North Carolina-based company said it paid the insurer premiums for $146 million per occurrence coverage for property damage and business interruption losses. And yet, Zurich has refused to reimburse the company “a single dollar” for its recent losses, in clear breach of their contract, according to the suit.

“There is no ‘contamination’ or ‘virus’ exclusion within this portion of the policies that could possibly exempt Zurich from providing Firebirds full payment thereunder,” the complaint says.

The provisions at issue cover business income losses, or “time element” coverage, including gross earning losses. They also cover losses caused by property damage and restricted access to property, including “loss of access caused by an order issued by a civil authority,” as well as any costs incurred in order to temporarily protect and preserve the insured property, the complaint says.

The six-count complaint asserts multiple breach of contract claims and asks the court to declare that its losses fall under multiple policy provisions.

Firebirds’ counsel, Jeffrey P. Goodman of Saltz Mongeluzzi & Bendesky PC, told Law360 on Friday that the company has been denied insurance coverage, “like so many other businesses,” even though his client paid a premium for an “all risk” policy that did not include any virus exclusions.

“It’s disappointing, but at the end of the day the Zurich policy here covering Firebirds is a very strong policy for the business owner,” Goodman said. “They clearly paid for certain protections with the understanding that Zurich would satisfy [the contract]. That’s the very reason we have insurance.”

Firebirds’ lawsuit is one of several that have been filed against insurers by restaurant chains, movie theaters, shopping malls, hair salons and other hospitality businesses that have been forced to close their doors since March due to state-mandated closures that aim to slow the spread of COVID-19.

The businesses generally claim that the insurers wrongfully denied them coverage for their losses, and the disputes have shed new light on the importance of various insurance policy terms and exclusions, including provisions that exclude coverage for losses due to contamination by viruses and bacteria.

Many of the lawsuits playing out in courts have also hinged on whether a virus can cause a “physical loss” to property, and so far, courts have appeared to lean in favor of the insurance companies on the matter. Earlier this month, a D.C. judge ruled that government shutdown orders don’t constitute a “direct physical loss” that triggers the policy.

The ruling followed a decision in July by a Michigan state judge who dismissed Gavrilides Management Co. LLC’s suit seeking $650,000 from Michigan Insurance Co. for losses it suffered after Gov. Gretchen Whitmer issued executive orders that limited its two restaurants to takeout and delivery orders.

At a hearing in the Judicial Panel on Multidistrict Litigation to determine whether to roll such suits into an MDL, attorneys called “direct physical loss or damage” the “five simple words” that were a common thread throughout the suits.

Representatives for Zurich didn’t immediately respond Friday to a request for comment.

Firebirds is represented by Adam J. Levitt, Amy E. Keller, Daniel R. Ferri, Mark Hamill, Laura E. Reasons, Kenneth P. Abbarno, Mark A. DiCello and Mark Abramowitz of DiCello Levitt Gutzler LLC; Robert J. Mongeluzzi, Jeffrey P. Goodman, Marni S. Berger and Samuel B. Dordick of Saltz Mongeluzzi & Bendesky PC; Mark Lanier, Alex Brown and Skip McBride of The Lanier Law Firm PC; Timothy W. Burns, Jeff J. Bowen, Jesse J. Bair and Freya K. Bowen of Burns Bowen Bair LLP; and Douglas Daniels of Daniels & Tredennick LLP.

Counsel information for Zurich American Insurance wasn’t immediately available Friday.

The lawsuit is Firebirds International LLC v. Zurich American Insurance Co., case number 2020CH05360, in the Circuit Court of Cook County, Illinois, County Department, Chancery Division.

–Additional reporting by Mike Curley.  Editing by Alyssa Miller.