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Law360 (March 26, 2021, 3:54 PM EDT) -- A New Jersey hair salon has joined a series of Garden State businesses that have lost their fights over business interruption insurance as judges in the state find virus exclusions in the policies foreclose coverage for pandemic-related losses.
U.S. District Judge Brian R. Martinotti ruled Thursday that Dezine Six LLC isn't owed coverage from Fitchburg Mutual Insurance Co. and its parent company, The Norfolk & Dedham Group, for losses to its Princeton hair and beauty salon when it closed its doors under government orders aimed at stopping the spread of the coronavirus.
"Courts in New Jersey have denied, at the motion to dismiss stage, an insured's claim for coverage under the same business income, civil authority, and extra expense coverage provisions, because of a same virus exclusion provision," the judge said, in a ruling that was the second by him in the same day.
On Thursday, Judge Martinotti also tossed a New Jersey Ford dealership's business interruption suit against Zurich American Insurance Co., citing the virus exclusion. The judge said the exclusion precluded Downs Ford Inc.'s claims for losses arising from the pandemic and government shutdown orders.
Dezine filed its suit in June 2020, alleging Fitchburg and N&D must cover the pandemic-related losses under business income, extra expense and civil authority provisions. The insurers moved to dismiss, arguing the virus exclusion precluded the financial losses. The hair salon argued the exclusion only barred coverage for "loss or damage" but not "expenses" from the suspension of its business.
Judge Martinotti, in Thursday's ruling, sided with Fitchburg and N&D. It didn't matter if Dezine had a "direct physical loss or damage" to the salon, the judge said, finding the virus exclusion barred recovery for losses, including expenses, that are related directly or indirectly to a virus like COVID-19.
"Since COVID-19 is an 'undisputed cause[] of loss' of Dezine's loss and damage of the covered property, and is 'the subject of an exclusion,' the virus exclusion with its anti-concurrent/anti-sequential clause denies Dezine any recovery under the policy," Judge Martinotti said, finding the insurers didn't misrepresent the virus exclusion.
The judge said New Jersey courts have reached the same conclusion on the virus exclusion.
This year, New Jersey federal judges relied on the virus exclusion to toss similar business interruption suits brought by a clothing retailer, restaurants, a gym and an eye care practice. A New Jersey state judge also found the virus exclusion clearly and unambiguously barred coverage for a bakery's losses.
A New Jersey federal judge dismissed a suit by owners of hotel and restaurant franchises including Wendy's, T.G.I Friday's, Marriott and Hilton for not showing a physical loss caused by the pandemic or government orders. However, the judge also noted a contamination exclusion applied in a footnote.
Representatives for both parties didn't immediately respond to requests for comment Friday.
Dezine is represented by James R. Ronca of Anapol Weiss.
Fitchburg and N&D are represented by Gina M. Stanziale of Methfessel & Werbel.
The case is Dezine Six LLC v. Fitchburg Mutual Insurance Co. et al., case number 3:20-cv-07964, in the U.S. District Court for the District of New Jersey.
--Additional reporting by Hailey Konnath, Jeannie O'Sullivan, Carolina Bolado, Lauren Berg, Bill Wichert and Daphne Zhang. Editing by Janice Carter Brown.
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