By Mike Curley

Law360 (October 27, 2020, 1:24 PM EDT) -- A Texas federal judge has handed Nationwide Mutual Insurance Co. a win over a Texas carwash that alleged the insurer wrongly denied it coverage of losses resulting from the COVID-19 pandemic, saying an "unambiguous" virus exclusion bars coverage.

In an order filed Monday, U.S. District Chief Judge Orlando L. Garcia threw out claims by Vizza Wash LP, which operates a number of carwashes in the state, with prejudice, rejecting its argument that the policy language was ambiguous.

While the judge acknowledged the policy language could have been more specific about denying coverage related to the pandemic, that does not make it ambiguous, he said, adding that the virus exclusion is clear enough that no amount of amending would save the case.

Vizza Wash, like thousands of businesses in the last eight months, put in a claim for insurance coverage after state officials ordered nonessential businesses to close in an effort to slow the spread of the coronavirus that causes COVID-19. The carwash owners sued Nationwide after the insurer denied their claims.

While Vizza Wash had argued the exclusion should not apply because the business didn't allege the virus was actually present at its locations, Judge Garcia said the exclusion applies to even indirect losses stemming from a virus, and the complaint alleges the shutdown orders were made because of COVID-19.

And because they were all premised on the allegation that Nationwide was wrong to deny coverage, Vizza Wash's claims for bad faith, conspiracy and unfair settlement practices must also be dismissed with prejudice, the judge wrote.

Before making his decision on dismissal, the judge also addressed Vizza Wash's motion to remand the case to state court, which revolved around whether insurance agent Bradley Worth — also a resident of Texas — was properly enjoined as a defendant in the case.

While Vizza Wash had alleged that Worth misrepresented the policy and its coverage when he sold the company the policy, the judge wrote there was nothing in the amended complaint supporting those allegations.

The complaint had no allegations that Vizza Wash specifically requested a certain type of coverage, the judge wrote, or that Worth had any basis to know that Vizza Wash expected the policy to cover business interruptions caused by COVID-19.

Texas courts have consistently held that an insurance agent doesn't have a general duty to explain all coverage limitations in a policy, Judge Garcia said, so Vizza Wash's claims against Worth fail as a matter of law.

Without a valid claim or possibility of recovery against Worth, the judge found that Worth was not a proper defendant in the case, and therefore the federal court retains jurisdiction over the suit.

"We are, of course, disappointed with the decision," Shannon E. Loyd of The Loyd Law Firm PLLC, representing Vizza Wash, told Law360 on Tuesday. "Our client paid for and expected business interruption coverage, and we were denied at the time when it was needed the most."

She added they have not yet decided whether to appeal.

Representatives for Nationwide and Worth could not immediately be reached for comment Tuesday.

Vizza Wash is represented by Shannon E. Loyd of The Loyd Law Firm PLLC.

Nationwide and Worth are represented by Patrick M. Kemp, Ethan D. Carlyle and Robert G. Wall of Segal McCambridge Singer & Mahoney.

The case is Vizza Wash LP d/b/a The Wash Tub v. Nationwide Mutual Insurance Co. et al., case number 5:20-cv-00680, in the U.S. District Court for the Western District of Texas.

--Editing by Marygrace Murphy.

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