The insurer said a Virginia federal judge correctly ruled that Skillets LLC was not improperly denied coverage for losses from government shutdown orders when its case was dismissed in March, and that despite any “creative” arguments the restaurant might make, it can’t get around the policy’s requirement for physical loss or damage.

Specifically, Colony said U.S. District Judge Henry E. Hudson did not err in finding that any structural changes the Florida-based restaurant made to mitigate the risk of the virus, such as moving tables or putting up barriers, did not constitute a direct physical loss or damage, nor did the virus’ alleged presence on surfaces, according to the brief.

Those claims have also been flatly rejected by Florida courts in more than 30 similar cases, and many others courts around the country, Colony said.

“Such ‘threat, spread, and/or presence of the virus’ allegations do not implicate coverage, as there is no actual physical, property damage involved,” the insurer told the appellate court.

Skillets’ counsel Timothy W. Burns of Burns Bowen Bair LLP told Law360 on Wednesday that there is no authority on how a Florida appellate court will rule on COVID-19 coverage cases because none has yet done so.

“Even though not a single Florida appellate court has ruled against coverage for COVID-19, Colony Insurance Company’s brief maintains that Florida case law favors them,” Burns said.

The Eleventh Circuit is currently considering whether to uphold the dismissal of a Florida steakhouse’s COVID-19 suit. Rococo Steak LLC appealed its case in May, claiming it suffered physical loss or damage to its property from the virus and government closure orders.

Burns added that he is hopeful the Fourth Circuit will do what he suspects very few trial court judges have done and “read every word of one of these insurance policies before making pronouncements about what an isolated term means.”

“After reading one of these confused monstrosities, word for word, a court is likely to approach these questions with a great deal of humility and may even do what the law commands — give undefined terms the meaning that an ordinary layperson would give to them,” he said.

Skillets, which operates nine restaurants in southwest Florida with Good Breakfast LLC, sued Colony last year in a proposed class action, claiming the insurer wrongfully denied it coverage for pandemic-related losses after it was forced to temporarily stop in-person dining.

In its appeal of Judge Hudson’s ruling to the Fourth Circuit in June, the restaurant argued its coverage was triggered by the loss of use and diminishment of its properties because the virus structurally altered its restaurants’ air and surfaces.

Colony said in its response that Skillets has failed to cite any Florida cases addressing the COVID-19 coverage issue and has instead asked the court to follow “outlier” cases that do not involve virus claims or have different policy language.

“Courts in Florida, and with very few exceptions, courts across the entire United States, have recognized that business closures associated with COVID-19 government shutdown orders do not constitute business interruption caused by ‘direct physical loss of or damage to” property,” Colony said.

And, the insurer argued, Judge Hanson had appropriately agreed with those decisions.

Colony further noted that a sister appellate court, the Eighth Circuit, weighed in for the first time earlier this month that “there must be some physicality to the loss or damage of property — e.g., a physical alteration, physical contamination or physical destruction,” for coverage to be triggered.

The Fourth Circuit has yet to rule on another COVID-19 business interruption case dismissal by an art gallery against Cincinnati Insurance Co. Uncork & Create was the first business to appeal its case to the appellate court in May, claiming a West Virginia federal court wrongly asked it to show its employees had been infected by the virus and had caused physical loss.

Counsel for Colony declined to comment.

The Skillets Restaurants are represented by Timothy W. Burns and Brian P. Cawley of Burns Bowen Bair LLP, Lisa S. Brook and Kyle McNew of MichieHamlett PLLC, Adam J. Levitt and Kenneth Abbarno of DiCello Levitt Gutzler LLC, and W. Mark Lanier of The Lanier Law Firm PC.

Colony is represented by William F. Stewart and Gary W. Berdeen of Stewart Smith Law.

The case is Skillets LLC et al. v. Colony Insurance Co., case number 21-01268, in the U.S. Court of Appeals for the Fourth Circuit.

–Additional reporting by Shawn Rice, Hailey Konnath, Daphne Zhang and Joyce Hanson. Editing by Haylee Pearl.

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.

In a reply filed Wednesday, the Diocese slammed arguments made by the Official Committee of Unsecured Creditors in an objection filed last week, saying the objection ignores the difficulties of pursuing the Diocese’s insurance claim against Certain Underwriters at Lloyd’s, London, and Certain London Market Insurance Companies and Interstate, and inflates the amount the Diocese could recover in litigation.

The $35 million deal should also push the Diocese’s other insurers back to the negotiating table, the Diocese argued, which would bring even more money around for abuse survivors to recover as part of an eventual reorganization plan, according to the brief.

The Diocese sought Chapter 11 protection in September 2019, citing hundreds of sexual abuse suits sparked by the New York Child Victims Act and the costs associated with those suits.

The Diocese filed insurance claims suits against its insurers after it was denied coverage and reached the deal with Lloyd’s and Interstate in June, resolving the insurance dispute with an agreement to set up a trust fund to compensate abuse survivors, with the insurers making a $35 million initial payment, according to court documents.

The Committee, however, objected last week, arguing that the “low value” settlement was unacceptable, as the Diocese could have continued to prosecute its insurance claim in court and potentially gotten hundreds of millions, if not billions, of dollars to put toward abuse survivors. After the objection was filed, several groups of survivor claimants filed joinders to that objection, adopting the same arguments.

In Wednesday’s reply, the Diocese said the Committee was ignoring the numerous defenses the insurers had proffered in that suit, saying there is no guarantee of prevailing in that suit and a $35 million settlement was better than the prospect of losing coverage entirely, calling the committee’s expectations “fanciful.”

Even if the abuse survivors’ claims could result in a large jury verdict, that doesn’t necessarily translate into a high insurance settlement value, the Diocese argued, saying the committee offered no justification for inflating the expected payout by “orders of magnitude” compared to payouts in similar circumstances.

While the Committee “shrugged off” the prospects of the insurers’ defenses, the Diocese pointed out several defenses that could strip it of coverage entirely.

In addition, the settlement is only the first step, the Diocese said, as other insurers are more likely to reach an agreement if this is approved, and the settlement deal is contingent on a successful Chapter 11 reorganization plan, which will protect the interests of creditors.

Jeff Anderson of Jeff Anderson & Associates PA, representing one group of survivors joining the objection, told Law360 on Thursday that the settlement effort is hurtful to survivors by not including them in the process, calling the bid to “jam down a settlement” an outrage. He said he will address the court to say that the settlement is doing further harm to survivors by not giving them a voice.

“They were cutout of power as kids and this effort by the bishop is a repeat of the abuse of power,” he said. “It is wrong. They are wrong in trying to do it and on behalf of the 169 survivors whom we represent in the Diocese of Rochester, we will make the survivors’ sentiments known.”

Ilan D. Scharf of Pachulski Stang Ziehl & Jones LLP, representing the Committee, said they intend to respond in court to the reply brief, and they continue to oppose the settlement as inadequate.

Representatives for the Diocese could not immediately be reached for comment Thursday.

The Diocese is represented by Stephen A. Donato, Charles J. Sullivan and Grayson T. Walter of Bond Schoeneck & King PLLC.

The Committee is represented by Ilan D. Scharf, James I. Stang, Iain Nasatir, James Hunter and Brittany M. Michael of Pachulski Stang Ziehl & Jones LLP and Timothy W. Burns and Jesse J. Bair of Burns Bowen Bair LLP.

Certain objectors are represented by Jeff Anderson of Jeff Anderson & Associates PA.

Lloyd’s is represented by Catalina J. Sugayan of Clyde & Co. US LLP and Russell W. Roten of Duane Morris LLP.

Interstate is represented by Charles E. Jones of Moss & Barnett PA and Peter McNamara of Rivkin Radler LLP.

The case is In re: The Diocese of Rochester, case number 2:19-bk-20905, in the U.S. Bankruptcy Court for the Western District of New York.

–Editing by Orlando Lorenzo.

The Philadelphia Union professional soccer team has joined the legion of sports and entertainment franchises suing their insurers for refusing to pay claims for COVID-19-related business losses, a new Illinois state court action shows.

The suit filed Monday in Cook County Circuit Court by various entities controlling the Major League Soccer club and Subaru Park stadium accuses Continental Casualty Company of breach of contract for not honoring its $192 million policy covering loss and damage at the stadium and several outlying buildings caused by contamination and government shutdown orders.

“As a direct and foreseeable result of the defendant’s breach of contract and duty of good faith and fair dealing, plaintiffs have been deprived of the benefits due to them because of their covered loss,” the suit says.

Due to public health restrictions, the 18,500-seat stadium was unable to host fans between March and October 2020, and was only recently allowed to admit guests at full capacity in June. Even after occupancy restrictions were eased to 50% in April, the franchise could only seat a quarter of the stadium while adhering to social distancing requirements, the suit says.

The team says it lost more revenue than it might have in previous years, because it won its first-ever trophy in 2020 and missed opportunities to capitalize on celebratory events.

“Ordinarily, this success would have enabled plaintiffs to sell out home games more regularly at Subaru Park, obtain lucrative sponsorship deals, and to enjoy substantially increased merchandise sales to paying fans during the home games,” the suit says. “Plaintiffs have been severely limited in their ability to realize these sources of revenue that would have accompanied the Philadelphia Union’s success due to COVID-19.”

Instead, the club incurred additional expenses to reconfigure spaces for social distancing, implement touchless vending systems and beef up building air filtration as government restrictions were lifted, according to the lawsuit.

But Continental never sent an adjuster and instead deemed remediation work “preventative” and refused to acknowledge that players and employees got sick, the team says.

The policy contained no exclusions for viruses or communicable diseases, and Continental’s addition of virus and disease carve-outs in a new policy effective July 1 just proves the old one covered them, the soccer club says.

The policy excludes damage by microbes, but its language refers exclusively to “living organisms,” and the suit argues viruses are not alive.

The team is asking for a judge’s declaration that the pandemic triggered coverage under its policy with Continental, as well as damages in excess of $30,000 at a jury trial, court papers show.

The case is one of nearly 2,000 similar actions filed in state and federal courts around the country since March 2020, according to a litigation-tracking project by the University of Pennsylvania.

Like many others, the team argues that the presence of the coronavirus physically damages surfaces on its property, and says government restrictions on public gatherings led to a steep loss in revenue.

“The probability of illness prevented the use of the space in no less of a way than, on a rainy day, a crumbling and open roof from the aftermath of a tornado would make the interior space of a business unusable,” the suit says.

The team declined to comment on Wednesday.

A representative for Continental told Law360 on Wednesday that the insurer was “not available” for comment.

Plaintiffs Keystone Sports Entertainment, FC Pennsylvania Stadium LLC, Pennsylvania Professional Soccer LLC, Rivertown Developers LP, Rivertown TCI LP and KSE U2 LLC are represented by Adam J. Levitt, Amy E. Keller, Daniel R. Ferri, Mark Hamill, Laura E. Reasons, Mark A. DiCello, Kenneth P. Abbarno and Mark Abramowitz of DiCello Levitt Gutzler LLC; Mark Lanier, Alex Brown and Skip McBride of The Lanier Law Firm PC; Jeffrey P. Goodman, Marni S. Berger and Samuel B. Dordick of Saltz Mongeluzzi & Bendesky 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.

Counsel information for Continental was not immediately available.

The case is Keystone Sports and Entertainment LLC et al. v. Continental Casualty Company, case number 2021L006588, in the Circuit Court of Cook County, Illinois.

–Editing by Ellen Johnson.

Dozens of judges have ruled on cases in which businesses seek coverage for losses from the pandemic, but none have gone so far as to say that something like adding a patio or an air filtration system counts as the type of physical change that would be covered under insurance policies like the one held by the owner of the Panache Coiffure in Santa Monica, California, the insurer argued.

Out of hundreds of decisions on similar matters, no other court has found that modifications in response to the pandemic count as a physical loss or damage, Continental said.

“The few courts that have addressed this novel theory have soundly rejected it,” Continental said.

U.S. District Judge Charles P. Kocoras had ruled on June 1 that Continental would have to face claims by a proposed class led by Panache and Legacy Sports Barbershop in Virginia Beach, Virginia. The judge found that, because the virus prompted the businesses to make changes to their properties for more space, outdoor accommodations and other modifications, those changes are covered by the insurance policies’ physical loss or damage provisions.

The judge noted that he had already considered the issue of what constitutes a physical loss or damage in another case brought by Bradley Hotel Corp., and that he ruled against Bradley at the time because it had only alleged it lost the use of its business, not that anything about the business had otherwise changed.

But Panache had alleged it needed to do the renovations because of the virus, which went beyond just a loss of use, the judge said.

“Thus, we believe that plaintiffs have sufficiently alleged that the properties underwent a ‘distinct, demonstrable, physical alteration’ and therefore suffered ‘physical loss of or damage to’ the properties,” Judge Kocoras wrote in the order.

Legacy kicked off the litigation in July 2020 with a complaint alleging it lost business when it was forced to close for several weeks. When it reopened, it could only bring in half the customers and couldn’t perform some services like beard trimming, according to the suit.

In October, Legacy filed an amended complaint that added Panache, which had added an outdoor patio and installed barriers and sanitation stations to its salon. The two are seeking to represent a class of similar businesses with similar insurance policies, according to the suit.

But Continental argued that a new patio is an improvement and not damage, and that it was a response to government orders, not the virus itself.

“Neither an outdoor patio nor social distancing barriers are encompassed by any reasonable definition or construction of ‘direct physical loss of or damage to’ property,” the insurer wrote in the reconsideration bid, also arguing that Panache claimed in its complaint that the modifications were repairs to the covered damage, not the damage itself.

Among federal rulings on motions to dismiss COVID-19 coverage suits, only about 6% have been denied, according to the University of Pennsylvania’s Covid Coverage Litigation Tracker.

Representatives for Legacy and Panache did not immediately return requests for comment, and their counsel declined to comment.

A Continental spokeswoman said the company was unavailable for comment, and its attorney declined to comment on pending litigation.

The proposed class is represented by Adam J. Levitt, Amy E. Keller, Daniel R. Ferri, Mark Hamill, Laura E. Reasons, Mark A. DiCello, Kenneth P. Abbarno and Mark Abramowitz of DiCello Levitt Gutzler LLC, 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, Douglas Daniels of Daniels & Tredennick and C. Calvin Warriner III of Searcy Denney Scarola Barnhart & Shipley PA.

Continental is represented by Michael L. McCluggage, Brent R. Austin, Caroline P. Malone, John K. Adams and Robert E. Dunn of Eimer Stahl LLP.

The case is Legacy Sports Barbershop LLC et al. v. Continental Casualty Co., case number 1:20-cv-04149, in the U.S. District Court for the Northern District of Illinois.

–Additional reporting by Shawn Rice. Editing by Bruce Goldman.

By Shawn Rice | June 15, 2021

On the heels of a ruling in three bellwether cases in multidistrict litigation over Society Insurance Co.’s widespread denial of pandemic-related coverage, an Illinois federal judge on Tuesday refused the insurer’s bid for an appeal concerning claims for business interruption coverage.

U.S. District Judge Edmond E. Chang rejected Society’s call to send to the Seventh Circuit the question of whether a policyholder’s loss or partial loss of use of property is “direct physical loss of” its property. The judge noted the “intricacy of the policy’s provisions and complexity and fact-rich complaints.”

Society repeats many of the same arguments in its dismissal and summary judgment motions, the judge said. The denial of the motions on the business interruption claims focused on the fact-bound question of whether Society’s policy “is nothing if not ‘long’ and ‘detailed’ and ‘obscure,'” Judge Chang added.

And without certification of the liability question, Judge Chang also found no need to have the Seventh Circuit consider the viability of the policyholders’ bad faith claims, as those claims won’t affect discovery. Therefore, the likelihood of the case ending as a result of any appellate decision on the bad faith claims “is close to zero,” according to the judge.

“Appealing now would be premature, distract the parties from advancing the case in the district court, and would not speed this court’s progress of the litigation toward that final judgment,” the judge said.

At dispute is Judge Chang’s selection of dismissal or summary judgment motions filed by Society in three cases — two filed in Illinois federal court and one filed in Wisconsin federal court — to serve as bellwethers to address policy interpretation issues common to the 40-plus cases that are consolidated in the MDL.

The Illinois cases are comprised of Chicago-area bars, theaters and restaurants dubbed the “Big Onion plaintiffs,” and an eatery in Glenview, Ill., called Valley Lodge. The Wisconsin case involves bars and restaurants known as the “Rising Dough plaintiffs,” located in Wisconsin, Minnesota and Tennessee.

In February, Judge Chang allowed the policyholders in all three bellwether cases to continue with claims for business interruption coverage under the policies. The Big Onion plaintiffs and Valley Lodge were also permitted to proceed with allegations that Society denied their insurance claims in bad faith.

Judge Chang wasn’t convinced that physical loss or damage requires a tangible alteration to physical property. He ruled, however, that the claims under the civil authority, contamination and extra expense coverages, as well as the sue and labor provision of Society’s standard policy, can’t proceed.

Society asked for an appeal to the Seventh Circuit in March, arguing that the majority of courts applying Illinois law say a policyholder’s inability to use its property due to the presence of the coronavirus and government shutdown orders wasn’t a direct physical loss.

But in Tuesday’s ruling, Judge Chang declined to give Society that appeal. Having the Seventh Circuit weigh in on the business interruption coverage issue wouldn’t advance the litigation, the judge said, noting that he has already ordered mediation and discovery to proceed “as quickly as practicable.”

Counsel for the parties didn’t immediately respond to requests for comment Tuesday.

The policyholders are represented by co-lead counsel Shelby S. Guilbert Jr. of McGuire Woods 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, Eastern Division.

–Additional reporting by Celeste Bott. Editing by Regan Estes.

By Shawn Rice | June 11, 2021

A Florida family-owned chain of restaurants urged the Fourth Circuit for another shot at obtaining coverage from Colony Insurance Co. for pandemic-related losses, arguing a Virginia federal judge incorrectly found that their properties had to be structurally altered by the coronavirus for there to be a covered physical loss.

Even under the judge’s restrictive interpretation, the owners of Skillets Restaurants said Thursday, the presence of the coronavirus caused a covered loss. The virus structurally altered the restaurants’ surfaces and air, resulting in the loss and diminishment of the properties, the owners told the Fourth Circuit.

“Not only is ‘structural alteration’ a requirement that is definitively not in the policy, but Colony and other insurers have known — since at least the early 1960s — that many courts do not agree that ‘direct physical loss of or damage to property’ requires structural alteration,” the restaurant owners said in a brief.

Skillets LLC and Good Breakfast LLC were forced to temporarily stop in-person dining at their nine Skillets Restaurants locations in Florida under government orders to mitigate the spread of the coronavirus, according to the proposed class suit filed in August. The restaurants accused Colony of wrongfully denying coverage for the pandemic-related losses.

In March, U.S. District Judge Henry E. Hudson of the Eastern District of Virginia, applying Florida law, tossed the suit. The judge ruled that Colony didn’t have to cover the losses as there wasn’t any “direct physical loss of or damage” to property as a result of the coronavirus or the closure orders.

In Thursday’s brief, the restaurants argued to the Fourth Circuit that courts have held a property’s loss of use is “direct physical loss or damage” triggering coverage. The owners said the presence of the coronavirus forced them to repair and refurbish the restaurants to make them safe for customers again.

“Functional spaces in the restaurants could only be used at a severely diminished capacity, with the dining rooms being entirely closed to customers for over a month and only reopening on a limited basis after significant alterations were made to the dining rooms and surrounding areas,” the owners said.

The Fourth Circuit is hearing a separate bid by an art class company to resurrect its proposed class suit for pandemic-related losses. That policyholder already argued that a West Virginia federal judge was wrong in finding that the coronavirus doesn’t cause physical loss because it can be cleaned from surfaces.

Florida law’s position on what is covered for pandemic-related losses is also before the Eleventh Circuit in cases involving appeals by a brunch chain, a steakhouse, another restaurant and a furniture chain.

Timothy W. Burns of Burns Bowen Bair LLP, counsel for Skillets Restaurants, told Law360 on Friday that his clients are hopeful the Fourth Circuit, and others like it, “will make short work” of decisions with poor reasoning, that are “linguistically suspect” and aren’t true to principles of policy interpretation.

There is no difference in the rules of policy interpretation between Virginia and Florida, Burns added. Rather, he said the case, like many others, presents straightforward claims for coverage that, under the policyholder-friendly rules of policy interpretation cited by most federal district courts, “are no brainers.”

“The insurance industry has managed to fragment the litigation and create a snowball effect from a few early, wrongly-decided victories,” he said. “Fortunately, fifty or so strong trees still stand.”

Counsel for Colony declined to comment Friday.

The Skillets Restaurants are represented by Timothy W. Burns and Brian P. Cawley of Burns Bowen Bair LLP; Lisa Sarah Brook and Edward Kyle McNew of MichieHamlett PLLC; Adam J. Levitt and Kenneth Abbarno of DiCello Levitt Gutzler LLC; and W. Mark Lanier of The Lanier Law Firm PC.

Colony is represented by William F. Stewart and Gary W. Berdeen of Stewart Smith Law.

The case is Skillets LLC et al. v. Colony Insurance Co., case number 21-1268, in the U.S. Court of Appeals for the Fourth Circuit.

–Additional reporting by Hailey Konnath, Daphne Zhang, Rosie Manins and Joyce Hanson. Editing by Abbie Sarfo.

St. Petersburg, Florida-based steakhouse Rococo Steak LLC told the circuit court in its Tuesday brief that it has suffered direct physical loss or damage to property caused by the coronavirus and resulting civil closure orders. And Aspen Specialty Insurance Co. has wrongly refused to pay for multiple coverages in the eatery’s “all risk” commercial insurance policy that should apply to those losses, according to Rococo.

Rococo urged the circuit court to reverse the lower court’s Jan. 27 dismissal with prejudice, saying U.S. District Judge Virginia M. Hernandez Covington wrongly tossed the suit based on Aspen’s motion to dismiss for failure to state a claim. The insurer impermissibly asked the judge to decide a factual dispute over whether COVID-19 causes structural alterations to property and ambient air, Rococo argued.

“The district court’s real complaint is not that Rococo Steak has failed to plead structural alteration, but rather that it did not think COVID-19 caused such structural alteration,” Rococo said in its brief. “But, under the Federal Rules of Civil Procedure, the district court is constrained from deciding pled and disputed factual issues on a motion for summary judgment, let alone a motion to dismiss. Ultimately under our legal system, those issues are decided by a jury.”

Rococo took issue with Judge Covington’s citation of an Aug. 18 circuit decision in Mama Jo’s Inc. d/b/a Berries v. Sparta Insurance Co., which affirmed that the insurer did not have to cover a Miami restaurant’s lost income and extra cleaning costs due to dust from nearby roadwork, agreeing with a Florida federal judge that the eatery’s claimed losses did not result from covered “direct physical loss of or damage to” its property.

Judge Covington’s order said Rococo failed to squarely address the binding Mama Jo’s precedent that alleged damage must be actual and physical.

“Like the restaurant in Mama Jo’s, Rococo does not allege that COVID-19 required removal or replacement of any property or items in the insured restaurant,” the judge wrote. “Rather, like the coating of dust and debris in Mama Jo’s, the surfaces allegedly contaminated by COVID-19 seem to only require cleaning to fix.”

But Rococo told the circuit court that Judge Covington and Aspen’s reliance on Mama Jo’s is misplaced when they take the position that there is no direct physical loss to a surface that can be cleaned. And rather than test the sufficiency of the complaint, the district court erred in deciding the case on the merits at the motion to dismiss stage, inappropriately making factual determinations and ignoring Rococo’s claim of losing its ability to function, according to the steakhouse.

“Not only was Mama Jo’s decided in the lower court on a motion for summary judgment … after the parties had the opportunity to conduct discovery and fully develop the factual record supporting their pleadings, but that court was not faced with a contention that loss of functionality was sufficient to constitute direct physical loss or damage,” Rococo argued.

The steakhouse’s initial complaint was lodged on Oct. 23 and alleged the presence of COVID-19, along with loss of functional space, and structural alteration of the restaurant’s surfaces and ambient air caused by the virus. The presence of the virus caused the property to be physically uninhabitable by customers and also caused its function “to be nearly eliminated or destroyed,” according to the brief.

Rococo claimed its October 2019 through October 2020 policy contained coverage for business interruption, extra expenses and civil authority closure orders. The policy contained no virus exclusion and applied to direct physical loss of or damage to covered property, the steakhouse said.

As of now, no Florida appellate court has addressed “direct physical loss of or damage to” property in the context of a coronavirus-related business interruption insurance loss, according to Rococo.

“The absence of appellate authority alone suggests that this case should be allowed to proceed past the pleading stage on this issue,” according to the brief. “Here, Rococo Steak has adequately alleged that COVID-19 and the resulting closure orders caused a loss of function and diminishment of covered property.”

Certification to the Florida Supreme Court is appropriate in Rococo’s case, the steakhouse concluded, saying the Eleventh Circuit would benefit from the state high court’s resolution of whether loss of use or functionality constitutes a “direct physical loss” of covered property, because there is no controlling Florida Supreme Court case on the issue.

Counsel for Rococo and Aspen did not immediately respond Wednesday to requests for comment.

Rococo Steak is represented by Steven H. Osber and Kyle S. Roberts of Conrad & Scherer LLP, and Timothy W. Burns of Burns Bowen Bair LLP.

Aspen Specialty Insurance is represented by Yvette Ostolaza, Chandler Rognes and Virginia Seitz of Sidley Austin LLP, and Patrick Betar and William S. Berk of Berk Merchant & Sims PLC.

The case is Rococo Steak LLC v. Aspen Specialty Insurance Co., case number 21-10672, in the U.S. Court of Appeals for the Eleventh Circuit.

U.S. District Judge Edmond Chang should reject Society’s bid to apply his ruling tossing civil authority claims from three bellwethers in the MDL because the request is part of the insurance company’s aim to refuse to cover their COVID-19-related business losses and then take “every step possible to hinder [their] litigation of those denied claims.”

“Those steps include, but are by no means limited to, Society’s efforts to keep these cases fragmented, including its persistent refusal to acknowledge that, despite its efforts before the Judicial Panel on Multidistrict Litigation to halt the panel’s formation of this MDL proceeding, the JPML did, in fact, form it,” the policyholders said. “Society’s present motion is just the latest iteration of that strategy.”

Society argued last week that Judge Chang’s denial of civil authority and contamination coverage in three bellwether cases should be applied to 39 suits in the MDL similarly asking for that coverage, as well as two other cases asking solely for civil authority coverage. The insurer argued that applying the bellwether ruling MDL-wide would help streamline the proceeding.

But the policyholders, including bars such as The Whistler in Chicago and Wiseguys Pizzeria & Pub in Wisconsin, argued that the insurer’s bid broaden the bellwether ruling’s scope is based on its misreading of the first case management order Judge Chang entered in the case.

Judge Chang said in that order that he wanted to resolve bellwether case dispositive and issue-dispositive motions on an earlier track, and he did, they argued. Society’s bid to expand the scope of that provision in the court’s case management order “both disregards the limited nature of that initial bellwether process and, again, finds Society proposing a course of action that would unwind the JPML’s ruling and affirmatively undermine the purpose and function of MDL litigation,” the policyholders said.

“Society doesn’t get to attack each of the constituent actions comprising this MDL in this manner,” they argued. “Indeed, Society argued against the formation of this MDL proceeding before the JPML and lost that fight.”

Judge Chang tested Society’s motions to dismiss and for summary judgment in three bellwether cases on policy interpretation issues over the denial of coverage for the pandemic that are common to most of the 40-plus cases folded into the MDL, which was formed by the JPML.

Two of the suits were brought in Illinois federal court by Chicago-area restaurants, theaters and bars dubbed the “Big Onion plaintiffs,” and a Glenview, Illinois, eatery called Valley Lodge. A group of bars and restaurants known as the “Rising Dough plaintiffs” filed the third federal suit in Wisconsin.

In the February ruling, Judge Chang allowed the restaurants, bars and theaters to proceed on business income coverage claims. But the judge dismissed the policyholders’ claims under civil authority coverage, saying the stay-at-home orders did not prohibit them from accessing the properties.

Judge Chang also said the policyholders could not tap into the contamination provision, which extended coverage for lost business income and cleaning costs associated with closures due to contamination. The policyholders did not claim that they closed based on an actual COVID-19 contamination, the judge said.

Society has already asked for an immediate appeal of Judge Chang’s refusal to dismiss the policyholders’ claims for business income coverage. It argued that the Seventh Circuit should be allowed to answer whether the policyholders’ loss of use of property is a “direct physical loss” under its policies.

Counsel for the policyholders declined to comment on Wednesday. Representatives for Society didn’t immediately respond Wednesday to a request for comment.

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

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

The case is In Re: Society Insurance Co. COVID-19 Business Interruption Protection Insurance Litigation, MDL number 2964 and case number 1:20-cv-05965, in the U.S. District Court for the Northern District of Illinois.

–Additional reporting by Shawn Rice. Editing by Rich Mills.

Lexington Insurance Co. and other insurers asked the court last month to toss the tribe’s suit seeking COVID-19 business-interruption coverage for a proposed class that purchased insurance from a tribal property insurance plan, arguing that they failed to allege physical loss or damage to their insured properties that would trigger coverage under the policy.

The Menominee tribe, along with its Menominee Casino Resort and the Wolf River Development Co., said in a response Friday that two suits in the same court by policyholders over coronavirus business-interruption coverage that were dismissed last year actually back the tribe’s claims against Lexington and the other insurers.

While Lexington, whose motion to dismiss was joined by several other insurers, is “essentially maintaining if not outright saying — contrary to this court’s earlier rulings — that there exists no circumstance in which a policyholder can recover for COVID-19 losses,” the tribe’s amended complaint follows the “roadmap” for such claims laid out in those earlier cases, according to the Menominee.

The tribe said it “need[s] only allege that COVID-19 was present on its property and rendered the property unsafe or diminished its function” to show physical loss or damage, and “there is no further requirement of structural alteration of the property.” And the insurers’ “contention that COVID-19 harms people, not property does nothing to make the Menominee’s allegations less plausible,” according to the tribe, and it should be left to a jury to decide whether the evidence supports the tribe’s claims.

The Menominee first filed the proposed class action in November in California state court, before it was removed to a federal venue in January. The tribe amended its complaint in March, asserting breach of contract claims. The tribe owns a number of businesses including hotels, casinos, restaurants and health care facilities, all of which have suffered direct physical losses or damages from the coronavirus, according to court documents.

The proposed class purchased a 10-year policy from the Tribal Property Insurance Program that ended in July. The policy, prepared by Tribal First, which is an Alliant Underwriting Services Inc. program, holds a number of insurance policies from more than a dozen insurance carriers, court documents show.

The Menominee tribe said it submitted its claim to the insurers to help cover business-interruption losses from the pandemic and closure orders, which the insurers denied. By denying coverage, the insurers breached their coverage obligations under the policy, the proposed class argued.

In seeking dismissal of the case, the insurers, which also include Endurance Worldwide Insurance, Allied World National Assurance Co., Arch Specialty Insurance Co., Liberty Mutual Fire Insurance Co., Landmark American Insurance Co., Evanston Insurance Co. and Hallmark Specialty Insurance Co., argued that the tribe hadn’t adequately alleged physical loss or damage and that its insurance policies clearly include virus exclusions that foreclose its bid for coverage.

The question of whether businesses are incurring physical damage from the pandemic worthy of loss coverage has fueled litigation across the country, as business owners face off against insurers in court over pandemic-related loss claims. In Missouri, a federal judge ruled in August that the presence of the virus made a property unusable and, therefore, triggered a physical loss.

On Friday, the Menominee tribe said it brought claims similar to those from Studio 417 and other hair salons and restaurants in the Missouri case, in which the court rejected an insurer’s assertion that its policies’ core requirement of direct physical loss or damage can be satisfied only by a tangible alteration to property.

“Just like the plaintiffs in Studio 417, the Menominee have alleged that persons with COVID-19 were on covered property, infected the covered property, and rendered it unsafe and diminished its function,” the tribe said, noting that 42 employees of its businesses tested positive for COVID-19 last year.

The tribe also argued that two other decisions from the Northern District of California — though they didn’t go the plaintiffs’ way — established standards for bringing coronavirus-related complaints that the tribe is able to meet.

In November, the same judge overseeing the current case, U.S. District Judge William H. Orrick, axed a suit from Hawaiian souvenir store chain Water Sports Kauai Inc. seeking COVID-19 loss coverage from Allianz insurance units, ruling that the “mere threat of coronavirus” does not cause a direct physical loss of or damage to covered properties.

And in September, another Northern District of California judge tossed a proposed class action filed by children’s clothing boutique Mudpie Inc. against Travelers Casualty Insurance Co. of America, concluding that because the retailer hasn’t alleged that COVID-19 was present or directly caused the loss, there was no physical force that led it to lose business.

The Menominee tribe said in its response that the court “ruled against the policyholders in those cases, dismissing their complaints, but in doing so also set forth the legal principles that govern whether subsequent COVID-19 business-interruption insurance complaints would sufficiently state a claim.” The tribe argued it had adequately alleged “direct physical loss or damage” to its property under the business-interruption provisions of its policy as well as several other provisions.

The tribe said it’s not required to show structural alteration to its property to show damage or loss, but that it has nevertheless alleged that the coronavirus had changed its property and made it “dangerous to handle and/or enter,” and that the virus “cannot be eliminated by simple cleaning and disinfecting.”

And the tribe contended that its policy “does not include, and is not subject to, an exclusion for losses caused by the spread of viruses or communicable diseases.”

Representatives for the parties did not immediately respond to requests for comment Monday.

The proposed class is represented by Andrus Anderson LLP, DiCello Levitt Gutzler LLC, Burns Bowen Bair LLP and the Lanier Law Firm PC.

The insurers are represented by Zelle LLP and Gibson Dunn & Crutcher LLP.

The case is Menominee Indian Tribe of Wisconsin et al. v. Lexington Insurance Co. et al., case number 3:21-cv-00231, in the U.S. District Court for the Northern District of California.

–Additional reporting by Melissa Angell, Shawn Rice and Lauren Berg. Editing by Breda Lund.