By Lauren Berg

Law360 (February 17, 2021, 7:05 PM EST) -- A Minnesota federal judge on Wednesday tossed a hotel, restaurant and event center company's lawsuit seeking business interruption coverage from Continental Casualty Co. in the wake of the coronavirus pandemic, finding that there were insufficient allegations of property contamination.

U.S. District Judge Paul A. Magnuson granted Continental's motion to dismiss Torgerson Properties Inc.'s suit alleging that it suffered a physical loss of its property from virus contamination that led to customers and employees being deprived access to the hotels and restaurants, saying there is no allegation of specific contamination.

Torgerson — which owns 40 hotels, restaurants and event spaces in Minnesota and Florida, including franchises of Best Western, Hilton, Holiday Inn and Marriott — first filed suit against Continental in state court before it was moved to the federal realm in October, according to court records.

The hotel and restaurant company alleged that its insurer should cover its business interruption losses in the wake of the pandemic, but Continental said in its motion in November that the policy doesn't cover loss of property use that comes as a result of government orders.

In his order Wednesday, Judge Magnuson said Torgerson relies on documents outside of the complaint to make broad statements that "essentially all employees have been affected by the virus" and that the company believes "one employee has tested positive for the virus ... and that one visitor has tested positive for the virus."

"These general statements, even if they had been included in [Torgerson]'s pleadings, are insufficient to establish the sort of contamination that might give rise to a claim for 'direct physical loss' under the policy," Judge Magnuson said.

The judge said it wasn't the virus on the premises that closed Torgerson's properties, it was the state's stay-at-home orders meant to slow the spread of the virus. The term "physical loss of or damage to" does not include the simple deprivation of a business' property, the judge said, citing the 2020 Western District of Missouri case Zwillo V Corp. v. Lexington Ins. Co.

Judge Magnuson dismissed Torgerson's suit with prejudice, saying the company hasn't established that its insurance policy with Continental Casualty provides coverage for its claims.

Representatives for the parties did not immediately respond to requests for comment Wednesday.

Judges around the country have for the most part been tossing these COVID-19 insurance coverage cases, with many cases going up the ladder to the appellate realm.

Last week, a New York state judge ruled that a Great American Insurance unit doesn't have to cover a movie theater's losses, finding that the direct physical loss or damage language at issue in the policy requires a tangible physical alteration to the policyholder's property, which did not occur.

A Pennsylvania federal judge earlier this month tossed a shuttered South Carolina restaurant's suit against Pennsylvania National Mutual Insurance Co. for much the same reason.

But two Philadelphia federal judges issued differing opinions on a pair of coverage lawsuits, with one judge ruling that a policy's "virus exclusion" bars coverage and the other deferring the issue to state courts.

Earlier this month, Los Angeles restaurant Plan Check asked the Ninth Circuit to reverse a district court's decision to toss its proposed class action seeking coverage from AmGuard Insurance Co. for losses stemming from COVID-19 shutdown orders.

And a group of Minor League Baseball teams sought to revive their suit against their three Nationwide insurers, after an Arizona federal judge granted a bid by National Casualty Co., Scottsdale Indemnity Co. and Scottsdale Insurance Co. to dismiss the case.

Torgerson is represented by Daniel I. Schlessinger and Tamra J. Miller of Jaszczuk PC and Christopher L. Lynch of Barnes & Thornburg LLP.

Continental is represented by Amy J. Woodworth, Julia J. Nierengarten and Louise A. Behrendt of Meagher & Geer PLLP.

The case is Torgerson Properties Inc. v. Continental Casualty Co., case number 0:20-cv-02184, in the U.S. District Court for the District of Minnesota.

--Additional reporting by Jeff Sistrunk, Daphne Zhang, Matthew Santoni and Mike Curley. Editing by Stephen Berg.

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