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In a pre-COVID 19 case, a federal appeals court affirmed a lower court ruling and held a Miami restaurant is not entitled to business interruption coverage, as well as reimbursement of other expenses, under its insurance policy for business lost because of nearby road construction.
Mama Jo’s Inc., which operates Berries restaurant in Miami, filed a claim with its insurer, Sparta Insurance Co., seeking more than $626,000 in connection with business interruption losses and other expenses under its all-risk coverage as a result of roadwork in its general vicinity from December 2013 until June 2015, according to Tuesday’s ruling by the 11th U.S. Circuit Court of Appeals in Atlanta in Mama Jo’s Inc., d.b.a. Berries v. Sparta Insurance Co.
The restaurant was seeking $292,550.84 because of lower-than-expected sales, as well as $319,688.57 to replace the restaurant’s awning and retractable roof systems, among other expenses, and $13,775.58 for cleaning and painting the restaurant.
After Sparta, which is now in runoff, denied the claim, the restaurant filed suit in U.S. District Court in Miami, which ruled in the insurer’s favor. A unanimous three-judge appeals court panel affirmed the lower court ruling.
The policy’s business income coverage form “requires that a ‘suspension’ of operations ‘be caused by direct physical loss of or damage to property,’” the ruling said.
“Even if Berries had shown a ‘suspension’ of operations, Berries did not put forward any…evidence that it suffered a direct physical loss or damage to its property during the policy,” said the ruling, which also affirmed the lower court’s dismissal of Berry’s other claims in the case.
Sparta attorney Jorge A. Maza, a partner with Hinshaw & Culbertson LLP in Miami, said, “The client is really satisfied with the decision. We saw once the pandemic started there could be potential implications for insurers litigating COVID claims, and we think the decision will probably be helpful with insurers dealing with similar language in the COVID context.”
Berry’s attorneys did not respond to a request for comment.
Last week, a federal court in Texas dealt another blow to commercial policyholders seeking coverage for coronavirus-related business interruption losses, ruling that pandemic-related lockdowns did not constitute a direct physical loss for a group of barbershops.