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Insurers win business interruption rulings against restaurants


A federal appeals court and a Maryland state appeals court affirmed lower court rulings in favor of insurers in three COVID-19 business interruption-related cases filed by restaurants on Tuesday.

Two of the cases were filed by the 11th U.S. Circuit Court of Appeals in Atlanta, while the third was issued by an intermediate Maryland appeals court in Baltimore.

The 11th Circuit affirmed a ruling by the U.S. District Court in Tampa, Florida, in a lawsuit filed by Bradenton, Florida-based First Watch Restaurants Inc., which operates more than 430 restaurants in 28 states, against Zurich Insurance Group Ltd. unit Zurich American Insurance Co., according to the ruling in First Watch Restaurants Inc. v. Zurich American Insurance Co.

The ruling cited the appeal court’s earlier decision in SA Palm Beach LLC v. Certain Underwriters at Lloyd’s London and the ruling by a Florida state appeals court in Commodore, Inc., v. Certain Underwriters at Lloyd’s London, in affirming the ruling by the U.S. District Court in Tampa, Florida.

“First Watch’s arguments are foreclosed by the interpretations of the phrase ‘direct physical loss of or damage to’” in SA Palm Beach and Commodore, the ruling said.

“We reject Frist Watch’s argument that its policy’s language is distinguishable from the policy language in several cases before this Court in SA Palm Beach,” the decision said. “We readily conclude that there is no principled difference.”

The 11th Circuit’s ruling in Left Field Holdings III v. Colony Insurance Co., which was filed by a company that operates Lime Fresh Mexican Grill in Doral, Florida, affirmed a decision by the U.S. District Court in Miami in favor of Argonaut Insurance Co. unit Colony Insurance Co.

It also cited the SA Palm Beach decision. It said it held in that ruling “that ‘physical loss of or damage’ requires ‘some tangible alteration of the property,’” in denying coverage for the restaurant.

Maryland’s intermediate appeals court, the Court of Special Appeals of Maryland, ruled in Lloyd’s favor in litigation filed by GPL Enterprise LLC, which operates The Anchor Bar in Frederick, Maryland, according to its ruling in GPL Enterprise, LLC v. Certain Underwriters at Lloyd’s.

“Like the vast majority of courts that have considered the question presented in this case, including every appellate court that has considered the question, we conclude that the policy at issue affords no coverage for the purely economic losses that GPL suffered in this case,” it said, in affirming dismissal of the restaurant’s breach of contract claim and the summary judgment against it.

Attorneys in the cases did not respond to requests for comment, or could not be located.