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A magistrate judge recommended Wednesday that a Florida U.S. district court reject a COVID-19 business interruption coverage case filed by an Italian restaurant against an XL Group Ltd. unit, but spends considerable space in his report describing why a comparable case was more successfully litigated.
Malaube LLC, which operates a Miami Italian restaurant, is suing XL unit Greenwich Insurance Co. in U.S. District Court in Miami, seeking business interruption coverage for the loss of business income as a result of COVID-19 government shutdowns, according to Wednesday’s report by a magistrate judge in Malaube LLC v. Greenwich Insurance Co. Greenwich filed a motion to dismiss the litigation.
“Defendant’s strongest argument is that Plaintiff’s amended compliant fails to state a claim because the insurance policy only provides coverage for the actual loss of business income if a direct physical loss or damage to the property causes a suspension to Plaintiff’s operations,” the report says.
“The policy further provides coverage for extra expenses during a period of restoration, but that also only applies if the insured property suffers direct physical loss or damage,” the report says.
“Defendant argues that Plaintiff has failed to state a claim because there are no allegations that the insured property has ever suffered a direct physical loss or damage.”
The report says a ruling “that addresses many of the arguments presented” is the August 12 ruling in Studio 417 Inc. v. Cincinnati Ins. Co., in which the judge ruled that COVID-19 particles were a “physical substance” that attached to and damaged property.
It appears to have been the first victory for policyholders suing insurers for COVID-19-related business interruption losses.
“This case is materially different because Plaintiff has not alleged any physical harm,” said the magistrate’s report. “There is no allegation, for example, that COVID-19 was physically present on the premises.
“Instead, Plaintiff only alleges that two Florida Emergency Orders forced the closure of its restaurant” which courts have found “to be insufficient to state claim because there must be some allegation of actual harm.
Parties in the case have 14 days to file written objections to the report with the district judge.
On Aug. 13, 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.