By Jeff Sistrunk

Law360 (May 5, 2020, 6:01 PM EDT) -- A group of underwriters at Lloyd's of London urged a Florida federal judge to dismiss a sports bar's lawsuit seeking coverage for lost business because of state-mandated restrictions amid the COVID-19 pandemic, arguing that the bar is pursuing only uncovered economic losses.

In a motion to dismiss filed Monday, the Lloyd's underwriters said that the operator of the Prime Time Sports Bar in Tampa is not entitled to business interruption coverage under its commercial property insurance policy because the disruption in the bar's business was not attributable to "direct physical loss or damage" to its property.

The underwriters noted Prime Time has not claimed that the novel coronavirus was detected on its premises. But even if traces of the virus were found at the bar, such a discovery would require "at most require extra caution, cleaning, or sanitization, and under established law those are economic concerns, not physical ones," they contended.

"Prime Time's allegations relate to purely economic losses brought on by outside events, not a direct physical loss to its insured property," the underwriters' attorneys wrote. "That coverage determination is correct as a matter of law, so the court should dismiss this lawsuit."

Prime Time filed suit on April 2, arguing that the Lloyd's underwriters should be required to pay out up to the $200,000 limit of its property policy to cover losses the bar has suffered following a pair of orders by Florida Gov. Ron DeSantis designed to stem the spread of COVID-19.

DeSantis' March 17 order called on bars and restaurants to operate at no more than 50% capacity and to space tables 6 feet apart. The governor's subsequent April 1 stay-at-home order forced onsite dining areas statewide to close, but he encouraged businesses to provide "delivery, carry-out, or curbside service to the greatest extent practicable."

In Monday's dismissal motion, the Lloyd's underwriters argued that Prime Time mischaracterized the two orders as requiring bars and restaurants to completely shut down. In fact, Prime Time conducted curbside pickup and delivery services while the governor's orders were in effect, and as of Monday the bar had reopened with social distancing measures in place, the underwriters said, citing Prime Time's website and social media posts.

In any event, the Lloyd's underwriters contended, coverage is unavailable because the restrictions on Prime Time's business didn't result from any direct physical loss or damage.

The Lloyd's underwriters predicted that Prime Time will argue the governor's orders or the coronavirus itself rendered the bar uninhabitable or unusable for its intended purpose, which some courts have found to constitute property damage. But under the circumstances, that position must fail, because Prime Time "cannot possibly demonstrate uninhabitability," the underwriters argued.

Far from rendering bars and restaurants uninhabitable or unusable, DeSantis' orders actively encouraged those businesses to continue operating, albeit in a limited capacity, the underwriters said.

"If the cause is an external or extrinsic force that merely prevents access to the building, coverage does not apply," the underwriters' attorneys wrote. "That follows the policy language, because impeded access to the property is not a direct physical loss to the insured property itself."

In addition, the Lloyd's underwriters noted, Prime Time did not allege in its complaint that the coronavirus was discovered inside its bar or at nearby premises. Even if Prime Time files an amended complaint that does include such a claim, the presence of the virus wouldn't equate to direct physical loss or damage, the underwriters said.

"There is nothing about the COVID-19 virus that makes a structure uninhabitable," the underwriters' attorneys wrote. "Indeed, countless facilities throughout the nation have confirmed presence of that virus — hospitals and other medical clinics being primary among them — yet they are still open to business and their employees continue working. The virus requires that appropriate precautions be taken, but it does not cause direct physical damage to the property itself, and it does not destroy the property's physical utility as a structure and render it uninhabitable."

The underwriters further claimed that the complaint's lack of allegations of direct physical loss or damage is also fatal to Prime Time's bid for coverage under its policy's "civil authority" prong, which only extends coverage for losses tied to government-mandated closures if those orders result from damage to properties near the insured's place of business.

Counsel for Prime Time and the underwriters did not immediately respond to requests for comment Tuesday.

Prime Time Sports Grill is represented by Michael V. Laurato of Austin & Laurato PA.

The Lloyd's underwriters are represented by Michael D. Tinker and Mason Bradford of Cole Scott & Kissane PA.

The case is Prime Time Sports Grill Inc. v. Certain Underwriters at Lloyd's of London, case number 8:20-cv-00771, in the U.S. District Court for the Middle District of Florida.

--Editing by Amy Rowe.

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