In each case, the suits had previously been dismissed, but the dentist and restaurant group were allowed to amend their arguments to provide more information about how the virus may have caused physical damage.
However, U.S. District Judge Sidney A. Fitzwater was not persuaded, dismissing each case again without the option to amend after finding that the businesses hadn’t sufficiently shown they were owed insurance coverage.
In his dismissal of Dr. Christie Jo Berkseth-Rojas’s proposed class action against Aspen American Insurance Co., the judge said he agreed with courts around the country that have concluded that COVID-19 damages people, not property.
Judge Fitzwater also wasn’t persuaded by efforts to compare damage from COVID-19 to damage from asbestos or smoke, as he did when first tossing her case.
While he said asbestos and smoke could cause covered property damage, that doesn’t mean “that any contamination by any deadly or harmful agent would necessarily constitute property damage under Minnesota law.”
Unlike those materials, Judge Fitzwater said a virus like COVID-19 “can be cleaned and disinfected from surfaces.”
Tim Burns, an attorney with Burns Bowen Bair LLP who represents Berkseth-Rojas, said the judge should have let a jury decide whether COVID-19 causes damage.
Despite pointing to asbestos and smoke contamination as covered damage in his previous dismissal order, Burns told Law360 in an email, “now, the court has decided that COVID-19 is just not harmful enough for this rule to apply. Really? More dead from COVID-19 than all our country’s wars combined, but somehow COVID-19 doesn’t even rise to the level of smoke?”
Burns acknowledged the overwhelming success insurers have had defeating COVID-19 coverage suits, but said that may be more a result of federal judges and clerks being “good at divining nuanced distinctions to ordinary words,” he wrote.
Instead, judges should read insurance policies “like ordinary lay people would,” he wrote.
“I think the win-loss record would be much different if every decision maker were forced to read these insurance policies word for word,” Burns wrote.
Also Tuesday, Judge Fitzwater dismissed Vandelay Hospitality Group’s suit against Cincinnati Insurance Co. over coverage for its two Hudson House restaurants and its Drake’s Hollywood steakhouse in Dallas County, Texas.
“Even if Vandelay has sufficiently alleged that COVID-19 was present in its restaurants, it has not adequately alleged that COVID-19 caused physical damage or loss,” the judge wrote. “Vandelay repeatedly makes the conclusory assertion that it suffered physical loss and damage. But it fails to specify what damage or loss was caused, aside from the presence of COVID-19 on the property.”
While the restaurant group argued that at least one of its staffers contracted COVID-19 at one of the restaurants, Judge Fitzwater said that was not enough to show that the virus caused physical loss or damage.
“Moreover, as Cincinnati notes and Vandelay acknowledges, COVID-19 can be removed from surfaces by routine cleaning,” the judge wrote. “Vandelay has not alleged anything about COVID-19 itself that has threatened the physical structures of its restaurants.”
A spokesperson for Cincinnati said the company “appreciate[s] the court’s decision that the coronavirus does not constitute a direct physical loss — a prerequisite for coverage — because it does not physically alter property.”
“We recognize the challenges facing many small businesses,” the emailed statement said. “We have been, and continue to be, committed to doing our part to support the families and businesses in our agents’ communities, including helping them to proactively manage risks and promptly paying covered claims.”
Counsel for Vandelay and Aspen did not immediately respond to requests for comment Wednesday.
Vandelay is represented by Jason H. Friedman and Kaitlyn M. Coker of Friedman & Feiger LLP and Richard D. Faulkner.
Cincinnati is represented by Daniel G. Litchfield, S. Jan Hueber and Mahan V. Wright of Litchfield Cavo LLP.
Berkseth-Rojas is represented by Timothy W. Burns, Jeff J. Bowen, Jesse J. Bair and Freya K. Bowen of Burns Bowen Bair LLP, by W. Mark Lanier, Ralph D. McBride and Alex J. Brown of The Lanier Law Firm PC, by Adam J. Levitt, Mark A. DiCello, Kenneth P. Abbarno and Mark Abramowitz of DiCello Levitt Gutzler LLC, and by Douglas Daniels of Daniels & Tredennick.
Aspen is represented by Yvette Ostolaza, Yolanda C. Garcia and Mason Parham of Sidley Austin LLP.
The cases are Vandelay Hospitality Group v. The Cincinnati Insurance Co. et al., case number 3:20-cv-01348, and Berkseth-Rojas DDS v. Aspen American Insurance Co., case number 3:20-cv-00948, each in the U.S. District Court for the Northern District of Texas.
Additional reporting by Daphne Zhang and Mike Curley. Editing by Vincent Sherry.