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Nationwide, Travelers prevail in COVID-19-related litigation

COVID closed

Federal courts in Atlanta and Los Angeles dismissed COVID-19-related lawsuits filed by restaurants against Nationwide Mutual Insurance Co. and Travelers Cos. units, respectively, but a state court ruled in favor of an Ohio restaurant against Cincinnati Insurance Co.

Nationwide unit Allied Insurance Co. of America prevailed against litigation filed by Henry’s Louisiana Grill Inc. in Henry’s Louisiana Grill, Inc. et al. v. Allied Insurance Co. of America, in Tuesday’s ruling by the U.S. District Court in Atlanta.

The U.S. District Court in Los Angeles ruled Friday in favor of Travelers unit Travelers Indemnity Co. of America in litigation filed by a Los Angeles restaurant, Mark’s Engine Co. No. 28 Restaurant LLC in Mark’s Engine Co. No. 28 Restaurant vs. Travelers Indemnity Co. of Connecticut et al.

However, a state court judge of the Lorain County Court of Common Pleas in Elyria, Ohio, refused to dismiss business interruption litigation filed by a Vermilion, Ohio, restaurant, Francois Inc., against The Cincinnati Insurance Co. in Francois Inc. vs. The Cincinnati Insurance Co.

In the Nationwide case, the insurer denied coverage to Henry’s Louisiana Grill and Henry’s Uptown, an affiliated private party space, under its policy based on the language of its business income provision and its virus or bacteria exclusion.

Plaintiffs argued the Georgia governor’s executive order closing the business generated a physical change, justifying coverage.  “The Plaintiff’s allegation of a physical change here is curious,” the ruling said. “The Plaintffs repeatedly note that COVID-19 has never been identified on the premises. …Therefore, no physical change as a result of the virus’ presence can be argued here.

“Instead, the Plaintiffs cast the Governor’s Executive Order as imposing some physical change on the covered premises.  Under the Plaintiffs’ logic, a minute before the governor issued the Order, the dining rooms existed in one state. A minute later, the Governor issued the Order, and the restaurant underwent a direct physical change that left the dining rooms in a different state.

“This interpretation of the contractual language exceeds any reasonable bounds of possible construction, pushing the words individually and collectively beyond what any plain meaning can support,” the ruling said, in granting Nationwide’s motion to dismiss the case.

In the Travelers case, the insurer argued the restaurant was not entitled to coverage under either the civil authority or business income and extra expense coverage, and that the virus exclusion applied.

In its ruling, the court said the restaurant did not plausibly allege any policy term applies, and even assuming it could plausibly allege direct physical loss or damage to its premises, the virus exemption precludes coverage.

The one-page Ohio state court ruling, issued Sept. 29, said, “The complaint states claims which arguably fit the terms and conditions of the insurance policy and therefore the claims and defenses need to be developed with a record. The parties should proceed with a discovery on liability/coverage while the damages issues are bifurcated.”

The court set a telephone status call for Oct. 27.

Plaintiff attorney Nicholas A. DiCello, a partner with Spangenberg Shibley & Liber LLP in Cleveland, said in a statement, “The policy does not include the industry standard virus exclusion. If business interruption insurance policies did not insure losses caused by a virus, as Cincinnati claims, there would be no need for an industry standard virus exclusion excluding those losses.” 

Cincinnati Insurance said in a statement, “We respect the legal process. As this case continues, we believe that the Court will ultimately enforce the language of our policy contract. Our commercial property insurance policies require direct physical damage or loss to property and do not provide coverage in this case.”

Attorneys in the Nationwide and Travelers cases could not be reached for comment.

More insurance and risk management news on the coronavirus crisis here.