By Carolina Bolado

Law360 (March 19, 2021, 7:58 PM EDT) -- A Chubb Ltd. unit urged a Florida federal court on Friday to toss a restaurant's proposed class action accusing the insurer of wrongly denying business interruption claims arising from COVID-19 closures, arguing that the pandemic did not cause direct physical loss or damage to the restaurant as required to trigger coverage.

Westchester Surplus Lines Insurance Co. asked for judgment on the pleadings in the suit brought by Cafe International Holding Co. LLC, which owns IT! Italy Ristorante Cafe & Bar in downtown Fort Lauderdale, because the restaurant was not physically altered or damaged because of the coronavirus.

Under Eleventh Circuit precedent, there must be an actual, tangible change to a property in order to trigger coverage for physical loss or damage, according to the motion.

"The mere temporary presence of an unwanted substance on the property is not enough," the insurer said.

Westchester Surplus claimed that the restaurant did not say whether the coronavirus was present on its property or if the virus changed the restaurant in any physical way. The insurer pointed out that the restaurant has been able to offer delivery and takeout services throughout the pandemic.

"Cafe International's complaint claims that the coronavirus temporarily rendered its restaurant unsafe, limited access to the restaurant and impaired the restaurant's intended use," the insurer said. "But even if such conclusory allegations were proven, they would not establish any 'direct physical loss of or damage to' the property, as required by the policy. Cafe International cannot overcome this fundamental legal defect."

In its lawsuit filed last April, Cafe International argued that the losses it has suffered in business income are covered by the business interruption coverage provided in its policy. It also asserted that the Chubb unit should pay out under "extra expense" coverage in the policy, for expenses that it has incurred to minimize the suspension of its business, and "civil authority" coverage, for the loss of business income caused by the government prohibiting access to the restaurant.

The suit alleges that Chubb and Westchester have failed to pay possibly thousands of other policyholders for similar claims arising from the pandemic, citing an announcement that Chubb's CEO made on national television that the insurer intends to take the position that its standard property insurance policies do not cover claims related to COVID-19 and that it would not pay business interruption claims arising from the disease.

Cafe International seeks to represent three nationwide classes: a "business income coverage class," consisting of policyholders who did not receive coverage for losses related to business suspensions caused by COVID-19; a "civil authority coverage class," made up of policyholders denied coverage for business income losses or extra expenses caused by a civil authority's action; and an "extra expense coverage class," including policyholders denied coverage for expenses they incurred trying to minimize the suspension of business caused by either the pandemic or a civil authority's response to it.

Attorneys for the parties did not respond to requests for comment.

Cafe International is represented by Stephen N. Zack, Bruce Weil, James Lee, Marshall Dore Louis, David Boies, and Alex Boies of Boies of Schiller Flexner LLP, and Steven C. Marks, Aaron S. Podhurst, Lea P. Bucciero, Matthew P. Weinshall and Kristina M. Infante of Podhurst Orseck PA.

Westchester Surplus Lines is represented by Richard B. Goetz, Allen Burton, Amy Laurendeau and Daniel M. Petrocelli of O'Melveny & Myers LLP, and Steven J. Brodie, Heidi Hudson Raschke and Andrew K. Daechsel of Carlton Fields PA.

The case is Cafe International Holding Company LLC v. Chubb Ltd. et al., case number 1:20-cv-21641, in the U.S. District Court for the Southern District of Florida.

--Additional reporting by Nathan Hale. Editing by Steven Edelstone.

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