By Dave Simpson

Law360 (December 17, 2020, 10:19 PM EST) -- A Florida federal judge dismissed a sports bar's lawsuit seeking coverage from a group of underwriters at Lloyd's of London for lost business because of state-mandated restrictions amid the COVID-19 pandemic, finding Thursday the bar did not experience a direct physical loss.

U.S. District Judge Charlene Edwards Honeywell said that the operator of the Prime Time Sports Grill 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.

"It suffered an economic loss that did not result from tangible damage," Judge Honeywell said. "This is not the type of loss that defendant undertook to pay for based on the plain meaning of the language in the policy."

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 six 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."

Prime Time did not allege in its complaint that the coronavirus was discovered inside its bar or at nearby premises, the underwriters argued in May. 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.

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.

Judge Honeywell's Thursday opinion cited a recent Eleventh Circuit finding on the "direct physical loss" language.

In August, a three-judge panel affirmed that Sparta Insurance Co. does not have to cover a Miami restaurant's lost income and extra cleaning costs due to nearby roadwork, agreeing with a Florida federal judge that the eatery's claimed losses did not result from covered "direct physical loss of or damage to" its property.

The panel of the appeals court upheld U.S. District Judge K. Michael Moore's 2018 decision granting summary judgment to Sparta in its coverage dispute with policyholder Mama Jo's Inc., which operates the Berries in the Grove restaurant in Miami's historic Coconut Grove neighborhood.

Berries had sought coverage under its "all risk" policy with Sparta for losses it says it incurred while an expansive road improvement project was underway on an adjacent street from December 2013 to June 2015, including the costs to clear the eatery of dust and debris from the project and lost income due to a decline in customer traffic.

But Judge Moore ruled that Berries' insurance claims are not viable because the restaurant failed to fulfill the policy's threshold requirement of showing its property sustained direct physical loss or damage. Under Florida law, the judge found, that phrase refers to tangible damage that renders a property "unsatisfactory for future use or requires repairs" — which did not occur in Berries' case, because it was able to clear its premises of the roadwork-related debris.

The Eleventh Circuit panel found no reason to disturb Judge Moore's conclusion, holding that his application of the Sunshine State's law was sound.

Judge Honeywell noted that Prime Time hasn't presented any binding authority to the contrary.

"The suspension was not caused by tangible damage," she said. "Instead, the government mandated a statewide closure of bars and restaurants due to the pandemic. Plaintiff has not alleged any tangible damage whatsoever."

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.

--Additional reporting by Jeff Sistrunk. Editing by Daniel King.

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