Eli Flesch | Law360 (August 25, 2021)

A group of policyholders has asked the Eleventh Circuit to save their separate pandemic coverage suits, saying lower court dismissals of their cases failed to account for meanings of physical loss that could qualify them for coverage.

The policyholders, two pizzerias in Florida and a Georgia-based hotel operator, said Tuesday that government pandemic restrictions that deprived them of the use of their property should be covered under policies they held with underwriters at Lloyd’s of London and the Liberty Mutual unit Employers Insurance Co. of Wausau.

The pizza companies, Gio Pizzeria & Bar Hospitality LLC of Coral Springs and Gio Pizzeria Boca of Boca Raton, said they paid premiums to underwriters at Lloyd’s under the expectation that they would be covered for the loss of their property, regardless of the cause. Saying their policies contained no virus exclusion, the pizzerias argued that the Florida district court misinterpreted their policy when it dismissed their suit.

“We hope that the Eleventh Circuit does what few of the district courts have done in these cases — actually interpret the policy language like an ordinary person would,” Tim Burns, an attorney for Gio’s, told Law360. “An ordinary person would go to the dictionary and recognize that the presence of COVID-19 or closure orders based upon COVID-19 causes a direct physical loss of their property.” COVID-19 is the respiratory ailment caused by the coronavirus.

The pizzerias said they had adequately alleged that the presence of the coronavirus in their bars and dining establishments made them unsafe for use, reducing what space could function properly and requiring expensive physical alterations.

It criticized the district court for its reliance on an oft-cited Eleventh Circuit decision, Mama Jo’s v. Sparta Insurance , which found no insurable damage was done to a restaurant filled with debris from a nearby construction site because routine cleaning resolved the problem. Insurers have raised Mama Jo’s to suggest that a property that can be cleaned to remove the coronavirus hasn’t experienced any physical damage.

“An ordinary person wouldn’t search the federal reporters for an unpublished decision involving road dust (Mama Jo’s) to understand what is meant by the term ‘direct physical loss’ or damage in the context of COVID-19,” Burns told Law360 on Wednesday.

The Georgia hotelier, Ascent Hospitality Management Co., said a lower court misinterpreted its policy to suggest that the kind of physical loss required for coverage must entail some sort of physical alteration. Just the presence or the suspected presence of the coronavirus counted as a covered loss under the policy, it said.

“Ascent Hospitality’s premises became unusable and inoperable because of both the presence of the virus and the governmental orders prohibiting access to its property, and Ascent Hospitality suffered a diminution and deprivation of its premises and sustained physical loss or damage, as required by the policy,” the hotelier argued.

It added that a contamination exclusion in its policy didn’t preclude coronavirus coverage because it was meant only to bar coverage for losses stemming from spills of hazardous substances or pollutants. The exclusion was not a virus exclusion, the hotelier stressed, saying it could not be invoked to deny coverage for pandemic losses.

Ascent, which saw its case dismissed by an Alabama federal court in May, operates a national portfolio of 30 hotels that include Marriott, Hilton and Hampton Inn locations in Alabama and across the South, with additional hotels in Indiana.

U.S. Magistrate Judge Gray M. Borden said at the time that properties contaminated with virus particles need only a routine cleaning, not the fixing or repairing for buildings that have been physically damaged, a requirement for coverage in Ascent’s policy. To succeed in their fights for coverage, the businesses would have had to “shoehorn” the meaning of cleaning and disinfecting into the ordinary definition of repairs, Borden said.

A spokesperson for Liberty Mutual declined to comment on Ascent’s appeal.

Counsel for the insurers and Ascent did not immediately respond to requests for comment.

Gio’s pizzerias are represented by Tim Burns, Jeff Bowen, Jesse Bair, Freya Bowen of Burns Bowen Bair LLP, William R. Scherer and Michael E. Dutko Jr. of Conrad & Scherer LLP, Adam J. Levitt, Mark A. DiCello, Kenneth P. Abbarno and Mark M. Abramowitz of DiCello Levitt Gutzler, and by Mark Lanier, Alex Brown and Skip McBride of the Lanier Law Firm.

Certain underwriters at Lloyd’s are represented by Paul L. Fields Jr., Armando P. Rubio, and Gregory L. Mast of Fields Howell LLP, and by David E. Walker and Fred L. Alvarez of Walker Wilcox Matousek LLP.

Ascent is represented by James Edward Murrill Jr. and Robert R. Riley Jr of Riley & Jackson PC.

Employers Insurance Co. of Wausau is represented by Josh B. Baker, Josh Hess, John Neiman and Mary K. Mangan of Maynard Cooper & Gale, and Melissa D’Alelio, Pamela Berman and Sandra Badin of Robins Kaplan LLP.

The cases are Gio Pizzeria & Bar Hospitality LLC et al. v. Certain Underwriters at Lloyd’s, case number 21-12229, and Ascent Hospitality Management Co. LLC v. Employers Insurance Co. of Wausau et al., case number 21-11924, in the U.S. Court of Appeal for the Eleventh Circuit.

–Editing by Neil Cohen.


Shawn Rice | Law360 (August 24, 2021)

Native American tribes and nations have seen mixed results in federal and state suits against insurance companies as they continue to bring litigation aiming to tap into billions of dollars of coverage for losses to casinos and resorts during the COVID-19 pandemic.

A California federal judge on Monday added to the loss tally by throwing out the Menominee Indian Tribe of Wisconsin’s proposed class suit against Lexington Insurance Co. and other insurers, saying the presence of the coronavirus didn’t cause “direct physical loss or damage” to the tribe’s property.

The tribe, which operates businesses in Keshena, Wisconsin, including a casino and health care center, argued it made repairs due to an actual exposure of COVID-19 at its businesses. But the judge wasn’t convinced that installing physical barriers and increasing cleaning measures was the same as making repairs.

Tim Burns of Burns Bowen Bair LLP, counsel for Menominee, told Law360 that the tribes’ cases are similar to what’s happening across the board in pandemic-related cases and is “something that nobody had anticipated— state courts are focusing on policy language and federal courts are focusing almost exclusively on earlier case law, instead of reading the policy as a whole.”

“In an ideal world, if we are to have any hope that the legal process will actually honor the meaning of ordinary people in interpreting insurance policies, Congress would pass a law sending decisions on the ordinary meaning of undefined insurance policy terms to civil juries,” Burns said.

While Lexington successfully had Menominee’s suit tossed, the insurer was named among others, in a suit brought earlier this month by Riverside County, California-based Pechanga Band of Luiseno Indians in California state court, in efforts to tap into a $1 billion policy for its own pandemic-related losses.

Ho-Chunk Nation also dragged Lexington and others to Wisconsin state court seeking coverage for pandemic-related losses to its casino and hotels. Ho-Chunk’s insurance program is similar to ones in Oklahoma state suits where the Cherokee Nation and Choctaw Nation of Oklahoma scored favorable rulings this year.

Burns said the insurance recovery law of all 50 states commands that undefined policy terms be read as an ordinary person would read them. The Oklahoma state courts took this command more seriously, according to Burns, unlike federal courts, where a majority is ignoring the contract language as a whole and comparing the dispute in front of them to earlier case law involving different factual situations.

“It displays an approach to the law of someone fresh out of law school, who has spent three years reading judicial decisions, but not a nanosecond reading insurance policies or other contracts,” Burns said.

These tribe and nation cases represent situations where the insurance companies “sold very expensive, high premium broad coverage policies to the tribes,” according to Scott Greenspan of Pillsbury Winthrop Shaw Pittman LLP, who represents policyholders in similar COVID-19 coverage fights.

“The insurance carriers are trying a bait-and-switch. These carriers sold these high-end policies, and now their lawyers are trying to take them away,” Greenspan told Law360, noting that “sweeping” pandemic exclusions were available to the insurers but that they chose not to use them.

For example, Pechanga Band alleged losses caused by physical loss and damage from the presence of the coronavirus were covered, as there isn’t any exclusion for pandemics, diseases or viruses in the policy. The tribe highlighted the addition of a communicable disease exclusion used in the policy’s renewal.

But the virus exclusion was in play on the opposite side of the country in a recent decision.

A Connecticut state judge ruled last week that the Mashantucket Pequot Tribal Nation could potentially recover only $2 million from the $1.6 billion available under its policy with Factory Mutual Insurance Co., finding most of the tribe’s pandemic-related losses are subject to the virus exclusion.

State high courts are likely to have the final word in many of the tribes’ and nations’ disputes.

In the Midwest, for example, the Oklahoma Supreme Court is already poised to hear COVID-19 coverage suits involving Lexington and the Cherokee Nation and Choctaw Nation, which were granted summary judgment wins in state courts. This is expected to be the first state high court to rule on the physical loss or damage issue.

Because the cases are being heard under the Oklahoma high court’s “accelerated appeals” procedure, absent extraordinary circumstances, Michael Levine of Hunton Andrews Kurth LLP, told Law360 that the Oklahoma high court won’t accept further briefing, nor does he expect it to accept amicus briefing.

Levine said the Oklahoma state courts’ findings of fact based on undisputed facts that put the claim within coverage for physical loss or damage, coupled with a correct application of the rules of insurance policy interpretation and pre-pandemic precedent, allowed the court to find in favor of the tribal nations.

“Despite the ‘scoreboard’ that insurers continue to tout vociferously, the factual findings and legal conclusions in the cases on appeal are fundamentally sound, which should lead to affirmances in each of the decisions under review,” said Levine, who represents policyholders in COVID-19 coverage suits.

The Oklahoma high court’s ruling will be “closely watched,” according to Greenspan, who expects “the insurance industry to come out swinging because the trial courts’ scholarly opinions are so devastating to their positions.”

Representatives for Lexington and Factory Mutual didn’t immediately respond to requests for comment Tuesday.

–Additional reporting by Shane Dilworth and Daphne Zhang. Editing by Vincent Sherry.


Daphne Zhang | Law360 (August 24, 2021)

Society Insurance Co. has urged an Illinois federal judge to nix all bad faith claims against it in pandemic business-interruption multidistrict litigation, saying it never issued a blanket coverage denial over COVID-19 losses.

The carrier asked U.S. District Judge Edmond E. Chang on Monday to dismiss the bad faith claims asserted under Iowa, Indiana, Minnesota, Tennessee and Wisconsin law. Society said it did not act in bad faith by issuing widespread denials, and that each coverage decision was based on the specifics of individual claims.

The policyholders have said Society wrongfully refused to honor its coverage obligation by denying their coronavirus-related loss claims. The insureds argued that the carrier issued “wholesale, cursory coverage denials,” and that Society’s CEO Rick Parks misrepresented coverage and discouraged them from filing insurance claims.

Judge Chang in February refused to dismiss the claims for lost business income coverage asserted by several dozen Society policyholders in three lawsuits. The judge had selected dismissal or summary judgment motions filed by Society in the three cases to serve as bellwethers for addressing critical policy interpretation issues common to most of the 40-plus cases that have been folded into the MDL, which the Judicial Panel on Multidistrict Litigation formed in October 2020.

Two of the bellwether cases were filed in Illinois federal court: one by a group of Chicago-area bars, theaters and restaurants, dubbed the “Big Onion plaintiffs,” and the other by an eatery in Glenview, Illinois, called Valley Lodge. The third was filed in Wisconsin federal court by a group of bars and restaurants in Wisconsin, Minnesota and Tennessee, known as the “Rising Dough plaintiffs.”

In February, the Big Onion plaintiffs and Valley Lodge were also permitted to proceed with allegations that Society denied their insurance claims in bad faith.

“Society denied coverage based on the policy terms and whatever individual facts they provided in submitting their claims,” the insurer countered Monday. “Society did not deny coverage to any policyholder — let alone on a blanket basis to all policyholders — via the Parks Memos.”

According to Society, Parks said in a March 5, 2020, memo that coverage for COVID-19 infections was “unlikely” and that policyholders should be prepared for uninsured loss. The CEO also said the insurer’s coverage decisions will be made based on the specifics of each case. A few days later, after the World Health Organization declared COVID-19 a global pandemic, Parks said policyholders must show direct physical loss or damage to property to get coverage.

In its Monday motion, the insurance company said Parks’ memo provided general information about the pandemic and listed what policyholders should expect without reaching a conclusion that Society would definitely deny all lost business income claims. Although “Parks did explicitly state that COVID-19 exposure ‘is not a Spoilage Covered Cause of Loss,'” he “did not discuss a coverage determination being made by Society specifically,” the carrier said, emphasizing that the CEO’s memo was “not a claim denial, but a description of the insurance system.”

“Mr. Parks’ memos carefully use non-conclusory language and describe general concepts. They are designed to inform, not to dictate individual claim outcomes,” the carrier said.

Counsel for the parties didn’t immediately return phone calls seeking comment Tuesday.

The policyholders are represented by co-lead counsel Shelby S. Guilbert Jr. of McGuireWoods LLP, Adam J. Levitt of DiCello Levitt Gutzler LLC, Timothy W. Burns of Burns Bowen Bair LLP, Shannon M. McNulty of Clifford Law Offices PC and W. Mark Lanier of the Lanier Law Firm PC.

Society is represented by co-lead counsel Thomas B. Underwood of Purcell & Wardrope Chtd. and Laura A. Foggan of Crowell & Moring LLP.

The case is In Re: Society Insurance Co. COVID-19 Business Interruption Protection Insurance Litigation, MDL number 2964, in the U.S. District Court for the Northern District of Illinois.

–Editing by Breda Lund