In-N-Out Doubles Down In Zurich Pandemic Coverage Beef

By Eli Flesch
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Law360 (June 7, 2021, 8:43 PM EDT) -- In-N-Out is fighting Zurich American Insurance Co. to keep its pandemic coverage suit alive, telling a California federal court that the insurer's dismissal bid relies too heavily on suits that don't allege the presence of the coronavirus in an insured property.

As of September last year, over 800 In-N-Out workers have been diagnosed with COVID-19, the respiratory disease caused by the coronavirus, the Golden State burger chain said Friday. It asserted that this actual presence of the disease, coupled with government shutdown orders, caused an insurable loss under its "all-risk" Zurich policy.

Citing the "evolving science" surrounding the virus, In-N-Out said it wouldn't be appropriate for the court to decide on Zurich's dismissal bid absent more expert opinion and scientific evidence. It said the presence of the virus causes direct physical loss by suffusing the air with virus particles that can linger even when surfaces are cleaned.

"A determination that the virus cannot cause loss of use of, impair or alter property is contrary to In-N-Out's factual allegations (and science)," the chain said in a memorandum. "So long as anyone infected with the virus is present inside the building they continue to shed virus particles adding to the existing virus," it added.

Zurich asked the court in February to dismiss In-N-Out's suit, saying the famed eatery didn't allege the kind of physical loss or damage required for coverage. It said its policy contained an exclusion for "loss of use" of property that precluded coverage for losses resulting from government-ordered restrictions. It added that those restrictions actually allowed In-N-Out properties to remain in use for food preparation and curbside pick up.

In-N-Out, Zurich claimed, "has not alleged, and cannot allege, that the COVID-19 virus, even if present on-site, physically changes the structural integrity of any insured location or renders any location unusable or unfit for human occupancy."

On Friday, In-N-Out reasserted that Zurich included no virus exclusion in its policy that would preclude coverage. It said 97 out of the 189 trial court cases Zurich cited as relevant to In-N-Out's case included a virus exclusion. And at least 160 of those cases also didn't allege the actual presence of the coronavirus in a place of business, it said.

Zurich has faced more pandemic coverage suits than almost every other major insurance group, according to data compiled by the University of Pennsylvania Carey Law School. Its 167 suits is second to Hartford Financial Services Group Inc.'s 244.

Last week, the owner of fashion giants Versace, Jimmy Choo and Michael Kors also fought an attempt by Zurich to dismiss its $500 million pandemic coverage suit in New Jersey state court. Capri Holdings Ltd. also pointed to hundreds of infected employees as proof of the virus's presence in its retail locations.

Last month, the owner of LA Fitness combined two pandemic loss suits into one $950 million action against insurers including Zurich in Washington state court.

And in April, a Florida restaurant chain asked the Eleventh Circuit to revive its virus loss suit, saying its Zurich Edge policy doesn't require policyholders to go through a "period of restoration" to show property repairs. Lindenwood Female College of Saint Charles, Missouri, also asked the court to keep alive a proposed class action for virus coverage.

Counsel for In-N-Out declined to comment on Friday's action.

Counsel for Zurich did not immediately respond to a request for comment.

In-N-Out is represented by Robert L. Wallan, Mariah L. Brandt and Rebecca Tierney of Pillsbury Winthrop Shaw Pittman LLP.

Zurich is represented by Sylvia Chiu, Alanna G. Clair, Shari L. Klevens and Connor M. Scott of Dentons, and by Jonathan R. Gross of Mound Cotton Wollan and Greengrass LLP.

The case is In-N-Out Burgers v. Zurich American Insurance Co., case number 8:20-cv-01000, in the U.S. District Court for the Central District of California.

--Additional reporting by Daphne Zhang. Editing by Leah Bennett.

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