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Law360 (December 18, 2020, 10:51 PM EST) -- A Pennsylvania federal judge nixed two insurance suits from Philadelphia restaurants seeking coverage for lost business from state-mandated pandemic-related closures, finding Thursday that they didn't sustain physical damage as required under their Admiral Indemnity Co. policies.
U.S. District Judge Timothy J. Savage dismissed with prejudice the coverage suits from Newchops Restaurant Comcast LLC and LH Dining LLC, ruling that Admiral's provisions related to a government's decision to shut down the restaurants only cover damage that is physical.
"The instigation of the orders prohibiting access must be a physical condition in a nearby property," Judge Savage said. "Loss of utility is not structural or physical. Nor is the mere possibility of the presence of the virus in the nearby properties."
Further, he said, even if the restaurants' damages did fall within the policy, they would be nixed by the policies' virus exclusions.
The virus exclusions let Admiral off the hook for coverage of any loss that is caused by or resulting from "bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease," according to the policy.
The restaurants attempted to beat the exclusion by arguing that their losses resulted from the shutdown, not the virus itself, but Judge Savage wasn't having it.
"Lest there be any ambiguity, the virus exclusion explicitly states that it 'applies to all coverage under all forms and endorsements . . . including . . . business income . . . or action of civil authority,'" Judge Savage said.
LH Dining, which operates under the name River Twice in South Philadelphia, filed suit in April claiming that it was entitled to coverage from Admiral under a provision related to loss of income when access to its property was barred by order of a "civil authority."
Newchops, which operates under the name Chops from a location in the Comcast Center in Center City Philadelphia, filed a similar suit against Admiral later that month.
LH and Newchops argued that orders from both Philadelphia's mayor and Pennsylvania's governor requiring nonessential businesses to shut down constituted the exact kind of "civil authority" action contemplated under their policies.
Instead, the companies suggested that Admiral would attempt to deny coverage in reliance on policy provisions excluding losses related to virus and bacteria.
In April, the pair of restaurants told U.S. Judicial Panel on Multidistrict Litigation that the availability of business interruption insurance in light of the novel coronavirus would be a key question requiring a uniform answer as the country deals with the economic fallout of the pandemic, urging it to consolidate the growing number of similar cases sprouting up nationwide.
River Twice is represented by Richard M. Golomb and Kenneth J. Grunfeld of Golomb & Honik PC and Arnold Levin, Frederick Longer and Daniel Levin of Levin Sedran & Berman LLP.
Newchops is represented by Richard M. Golomb and Kenneth J. Grunfeld of Golomb & Honik PC.
Admiral is represented by Antonia B. Ianniello of Steptoe & Johnson LLP.
The cases are LH Dining LLC v. Admiral Indemnity Co., case number 2:20-cv-01869 and Newchops Restaurant Comcast Llc V. Admiral Indemnity Company, case number 2:20-cv-01949, both in the U.S. District Court for the Eastern District of Pennsylvania.
--Editing by Emily Kokoll.
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