Zurich Beats Ohio Eatery's COVID-19 Insurance Coverage Suit

By Hailey Konnath
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Law360 (February 19, 2021, 10:56 PM EST) -- An Ohio federal judge on Friday handed Zurich American Insurance Co. a win in a bar and grill's COVID-19 insurance coverage suit, ruling that the Buckeye State eatery hadn't experienced a direct physical loss that would trigger coverage under its Zurich policy.

Brunswick Panini's, which operates as Panini's Bar & Grill, had alleged that Zurich wrongly denied coverage for its business income losses stemming from shutdowns associated with the pandemic. Panini's alleged breach of contract and breach of implied covenant of good faith and fair dealing in the proposed class action filed in August.

In a September motion to dismiss, Zurich argued that the restaurant hasn't plausibly alleged "direct physical loss of or damage to property" that would trigger coverage under its policy.

And U.S. District Judge Christopher A. Boyko Sr. on Friday agreed, throwing out the restaurant's amended complaint with prejudice. The restaurant's claim for loss of full use of their premises and for business interruption is precluded under Zurich's policy, Judge Boyko said in an order.

"Neither the COVID-19 virus nor the state government orders caused 'direct physical loss of or damage to' plaintiffs' Insured property," the judge said.

The fact that the restaurant wasn't able to use the property doesn't apply to the insurance policy's coverage, he said. And even if Panini's had a covered loss, the claim is precluded by the policy's microorganism exclusion, according to the order. That exclusion says that Zurich won't pay for loss or damage stemming from the presence of microorganisms, including viruses, the judge said.

"Although the court is sympathetic to the plight of the food and beverage industry in the midst of the COVID-19 pandemic, the court is not permitted to interpret the parties' contractual language to bring about a more equitable result," Judge Boyko said. "Nor is the court authorized to find ambiguity where none exists."

Panini's Bar & Grill operates a dozen locations, mostly in Ohio, according to its website. The restaurant said that it restricted its sales to carry-out and delivery only in mid-March, pursuant to an order from the Ohio Department of Health. Later that month, it shut down completely in response to a stay-at-home order.

Panini's made claims under its property portfolio protection policy with Zurich, but the insurer refused to cover them, according to the suit.

"Plaintiffs sustained direct physical loss of or damage due to the presence of coronavirus, and has unquestionably sustained direct physical loss as the result of the pandemic and/or civil authority orders issued by the Governor of Ohio," it said.

The finding in Friday's decision echoes dozens of others across the country, which declined to assign coverage to losses stemming from government-required closures.

Last month, a California federal judge granted Travelers Indemnity Co.'s bid to toss a Los Angeles restaurant's suit seeking COVID-19-related loss coverage, ruling that the eatery failed to allege a "direct physical loss" and that coverage is barred by the policy's virus exclusion.

A rare exception to the trend came later last month when an Ohio federal judge ruled that Zurich must cover losses suffered by more than a dozen steak and seafood restaurants due to COVID-19 shutdown orders, finding that the eateries' policy can reasonably be interpreted to cover the loss of use of property.

U.S. District Judge Dan Aaron Polster found that Zurich had breached its obligation to provide lost business income coverage to Henderson Road Restaurant System and a slew of related companies that operate 16 restaurants in Ohio, Michigan, Florida, Indiana and Pennsylvania, including 13 locations of the Hyde Park Prime Steakhouse chain.

The insurance company argued that tangible structural damage to the restaurants was necessary to satisfy the policy's threshold requirement that business income losses be tied to "direct physical loss of or damage to" property. According to Zurich, this prerequisite clearly was not met here because the eateries specifically stated in court filings that their properties did not sustain any structural damage — from the novel coronavirus or otherwise.

But Judge Polster rebuffed Zurich's assertions, instead agreeing with the restaurants that the business income provision can also reasonably be read to extend coverage in instances where the policyholder merely loses its ability to use its insured properties for their intended purpose. He said that, under that interpretation, the eateries have shown they suffered a covered loss of use because the various state and local pandemic closure orders temporarily prohibited them from offering in-person dining, which is the cornerstone of their business model.

Zurich representatives and counsel for the bar and grill didn't immediately return requests for comment late Friday.

Panini's Bar & Grill is represented by Thomas J. Connick of Connick Law LLC.

Zurich is represented by Kevin M. Young and Jennifer L. Mesko of Tucker Ellis LLP.

The case is Brunswick Panini's LLC et al. v. Zurich American Insurance Co., case number 1:20-cv-01895, in the U.S. District Court of the Northern District of Ohio.

--Additional reporting by Dave Simpson and Jeff Sistrunk. Editing by Emily Kokoll.

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

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Case Information

Case Title

Brunswick Panini's, LLC et al v. Zurich American Insurance Company

Case Number



Ohio Northern

Nature of Suit



Christopher A. Boyko

Date Filed

August 25, 2020

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