Sympathetic Judge Won't Review Restaurants' COVID-19 Case

By Rosie Manins
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Law360 (May 27, 2021, 1:24 PM EDT) -- A Georgia federal judge won't reconsider his dismissal of a bid by Atlanta restaurants for pandemic-related insurance coverage, saying his "immense sympathy" for them doesn't change the law or the outcome of their case.

U.S. District Judge Thomas W. Thrash Jr. denied Wednesday a motion for reconsideration by 11 companies behind popular Atlanta restaurants including Joe's on Juniper and Hudson Grille. Judge Thrash tossed in March their contract breach suit against Zurich American Insurance Co., finding the restaurant companies failed to allege property damage warranting insurance coverage.

He acknowledged Wednesday the challenging economic environment for restaurants in Georgia and across the country as a result of the COVID-19 pandemic. But he said that didn't change the fact that the companies' economic losses from the pandemic don't constitute the necessary direct physical loss of, or damage to, property under their Zurich insurance policy.

"As the court has noted before, these challenges are real, and the court has immense sympathy for those who have been so deeply affected by the pandemic," Judge Thrash said in his order. "However, that sympathy does not change the law or the outcome of the case here."

Restaurant Group Management LLC and affiliated companies sued Zurich in a Georgia state court in early November, saying Zurich wrongly denied their March 2020 insurance claim and July payment demand of $4 million to cover pandemic-related business losses.

The companies shared a commercial property policy for their metropolitan Atlanta restaurants, and by early November had lost more than $6.5 million as a result of the pandemic, according to the complaint.

Zurich removed the case to the Northern District of Georgia in late November, and sought its dismissal soon after, on the basis that the restaurants' losses were not the type covered by their insurance policy.

Judge Thrash said in his March dismissal order that the restaurants' revenue losses and extra expenses associated with the pandemic did not trigger insurance coverage under Georgia law.

No restaurant property was physically changed by the coronavirus, he said, referring to a heavily cited Eleventh Circuit ruling in Mama Jo's v. Sparta Insurance Co. that held policyholders must show their properties required physical repairs to constitute direct physical loss.

The restaurant companies said in their April motion for reconsideration that Judge Thrash didn't properly consider the details of their losses and misapplied case law.

But Judge Thrash rejected those arguments Wednesday and said the companies hadn't supported their reconsideration motion with any new evidence or intervening change in the law. He said they also failed to follow the court's rules when requesting certification of questions to the Georgia Supreme Court and so reconsideration of his denial to do so was also unwarranted.

"A motion for reconsideration is not a vehicle for repairing deficient motions," Judge Thrash said. "This court's local rules make clear that 'motions for reconsideration shall not be filed as a matter of routine practice' and should only be filed when 'it is absolutely necessary.'"

He denied the plaintiffs' request to stay dismissal of the case pending further Georgia appellate rulings or to amend the dismissal with prejudice to one without prejudice.

Restaurants involved in the case include six Atlanta-area Hudson Grille locations as well as Atlanta eateries Joe's on Juniper, Einstein's, Metrotainment Bakery and Sugar Shack.

Zurich had argued in opposition to the plaintiffs' reconsideration motion that they could not use it as a backdoor way to certify insurance questions of state law, and that Judge Thrash rightly held their pandemic-related losses were not covered by their insurance policy.

The insurance company urged in a separate but similar case Wednesday for the Eleventh Circuit to affirm dismissal of a national brunch restaurant chain's bid for pandemic-related insurance coverage. Zurich said First Watch Restaurants Inc.'s argument in that case — that it was entitled to coverage for non-physical or direct property damage — made a mockery of its policy's plain language.

Counsel for Zurich declined to comment on the Northern District of Georgia case on Thursday.

Counsel for the restaurants did not immediately respond to a request for comment.

Restaurant Group Management and the affiliated companies are represented by J. Robert Persons and William T. Lacy Jr. of Lindsey & Lacy PC.

Zurich is represented by Anthony W. Morris and Robin N. Johnson of Akerman LLP.

The case is Restaurant Group Management LLC et al. v. Zurich American Insurance Co., case number 1:20-cv-04782, in the U.S. District Court for the Northern District of Georgia.

--Additional reporting by Daphne Zhang and Diamond Naga Siu. Editing by Alyssa Miller.

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