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“An ordinary person wouldn’t search the federal reporters for an unpublished decision involving road dust (Mama Jo’s) to understand what is meant by the term ‘direct physical loss’ or damage in the context of COVID-19,” Burns told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