LA Eatery Can't Get COVID-19 Coverage, Travelers Tells Judge

By Lauren Berg
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Law360 (September 4, 2020, 6:31 PM EDT) -- Travelers Property Casualty Co. told a California federal judge during a telephone hearing Friday that it shouldn't have to cover a Los Angeles restaurant's revenue losses from the city's coronavirus shutdown, saying the insurance policy explicitly excludes coverage for losses related to any virus.

Richard J. Doren of Gibson Dunn & Crutcher LLP, an attorney for Travelers, urged U.S. District Judge André Birotte Jr. to toss the insurance coverage lawsuit brought by Mark's Engine Co. No. 28, a restaurant in downtown Los Angeles, asserting that the eatery's insurance policy clearly excludes coverage for any losses resulting from a virus or microorganism that is capable of inducing illness.

But the restaurant's attorney, Mark J. Geragos of Geragos & Geragos APC, said it is entitled to civil authority coverage because access to its business was prohibited by L.A. Mayor Eric Garcetti's order in March shutting down all nonessential businesses. The restaurant experienced revenue losses resulting from being physically unable to enter its property, Geragos said.

At the beginning of the shutdown order, Geragos said the restaurant wasn't able to provide takeout services like many other eateries because it is primarily a sit-down restaurant, which meant it couldn't bring in any money at first.

Geragos said Travelers' motion reads more like a motion for summary judgment and that the parties should be allowed to proceed to discovery to hash out some of these factual issues.

Turning to Doren, Judge Birotte asked whether the restaurant's closure could be attributed to the shutdown order, thereby satisfying the civil authority coverage. But Doren said no because there wouldn't have been a shutdown order had it not been for the outbreak of the novel coronavirus, which causes the deadly COVID-19.

Doren said the suit should be tossed with prejudice because there's no way to get around the policy exclusion.

"The policy won't pay for damage due to a virus," Doren said. "The virus exclusion eliminates any potential for coverage. There's no way to amend the complaint to state a claim."

Geragos said Travelers is conflating civil authority with the coronavirus and when Judge Birotte asked whether Garcetti shut the city down because of the virus, the attorney said it's a question that needs to be fleshed out with discovery.

When Judge Birotte pointed out that the first sentence of the shut down order states that it's in response to the coronavirus, Geragos said the insurance policy's virus exclusion comes into play if a restaurant has a virus on site. He said it doesn't say anything about coverage for a civil authority order related to a virus.

But Doren interjected to say that exclusion specifically applies to civil authority orders.

Judge Birotte said he would take the matter under submission and would likely have a written ruling in the next week or two.

Geragos told Law360 following the hearing that Travelers wants to rewrite not just their insurance policies but also Federal Rule 12(b)(6).

Counsel for Travelers did not immediately respond to a request for comment Friday.

Judge Birotte in July denied the restaurant's bid to remand the case to state court, finding that the eatery "fraudulently joined" Garcetti to avert federal jurisdiction. The judge said Travelers showed Garcetti should not be included in the case because he is not a party in the insurance contract between Travelers and its policyholder.

Last week, U.S. District Judge Stephen V. Wilson said Travelers needn't cover another Geragos-represented LA restaurant's claims stemming from the pandemic, saying Mediterranean eatery 10e hasn't shown that it is entitled to coverage under the policy as it hasn't suffered any "direct physical loss or damage."

But Judge Wilson did give the Mediterranean restaurant 14 days to amend its complaint.

Travelers and the Geragos firm have also been dueling each other in court.

In April, the insurer sued the law firm, saying it has no duty to cover the firm for business losses during the pandemic. The suit came a week after the firm launched a series of complaints in Los Angeles Superior Court accusing Travelers of wrongfully denying coverage to it and several other California businesses.

Geragos moved to toss Travelers' suit in June, but a judge denied the request in August, according to court records.

The restaurant in the instant suit is represented by Mark J. Geragos, Benjamin J. Meiselas, and Matthew M. Hoesly of Geragos & Geragos APC and Nitoj P. Singh and Harmeet K. Dhillon of Dhillon Law Group Inc.

Travelers is represented by Richard J. Doren, Deborah L. Stein and Theodore J. Boutrous Jr of Gibson Dunn & Crutcher LLP and Stephen E. Goldman and Wystan M. Ackerman of Robinson & Cole LLP.

The suit is Mark's Engine Co. No. 28 Restaurant LLC v. The Travelers Indemnity Co. of Connecticut et al., case number 2:20-cv-04423, in the U.S. District Court for the Central District of California.

--Additional reporting by Daphne Zhang, Hailey Konnath, Mike Curley and Jeff Sistrunk. Editing by Jay Jackson Jr.

For a reprint of this article, please contact reprints@law360.com.

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