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Law360 (June 18, 2021, 5:10 PM EDT) -- A Portland restaurant can't tap into coverage for losses during the COVID-19 pandemic, the Cincinnati Insurance Co. argued, saying a proposed federal class suit can't connect government shutdown orders to the alteration of property causing "direct physical loss or damage."
Cincinnati asked Thursday to have the suit tossed, arguing that its commercial property insurance policy does not cover losses to Papi Chulo's Restaurant for temporarily closing under orders to slow the spread of the coronavirus. There was no physical alteration to the property, the insurer said.
"Courts throughout the country have overwhelmingly concluded that there is no coverage for COVID-19 business interruption claims because the coronavirus and the related government shutdown orders do not physically alter or change property. The outcome should be no different here in Oregon," Cincinnati said.
Papi LLC, which owns the Portland restaurant, filed the putative class suit in March, alleging that Cincinnati had universally denied coverage for pandemic-related losses. But the restaurant argued coverage exists, pointing to the loss of use of its property under the shutdown orders and the "significant alterations" needed before reopening.
For example, the restaurant said it had to install protective barriers, increase its processes for cleaning and sanitizing, adjust hours of operation and employee hours and limit the number of customers.
But Cincinnati argues in Thursday's brief that the restaurant's alleged adoption of new measures to reopen did not physically alter the property. And Papi Chulo's Restaurant can't say the shutdown orders caused the installation of the barriers, as the decision to close was made by the restaurant, the insurer added.
"The government shutdown orders in question do not require the insured property to be repaired, rebuilt, or replaced or the insured's business to be permanently relocated," the insurer said, explaining that the orders allowed restaurants to continue offering take-out, delivery or drive-through services.
Civil authority coverage also does not extend to the losses, according to the insurer, as there was no physical loss or damage to any nearby property and the restaurant was not denied access to its location.
Seventeen total business interruption suits are pending in Oregon federal court over losses to businesses during the COVID-19 pandemic, but no rulings have been made on any pending motions, according to data from the University of Pennsylvania's COVID Coverage Litigation Tracker.
A representative for Cincinnati told Law360 on Friday that the company does not comment on pending litigation. The insurer's representative said the company remains committed to supporting families and businesses by "helping them to proactively manage risks and promptly paying covered claims."
Claire Howard, senior vice president and general counsel for the American Property Casualty Insurance Association, told Law360 on Friday that the organization does not comment on specific contracts or suits. But these policies were not intended to cover diseases or pandemic-related losses, she said.
"Lawsuits to mandate retroactive business interruption coverage to include COVID-19 losses not in contracts would undermine the stability of the insurance industry and its ability to pay claims on all existing insurance policies," Howard said.
Representatives for the restaurant did not immediately respond to requests for comment.
The restaurant is represented by Kyle A. Sturm and Nicholas A. Thede of Foreman Sturm & Thede LLP; Nicholas A Kahl of Nick Kahl LLC; and Craig Lowell of Wiggins Childs Pantazis Fisher & Goldfarb LLC.
Cincinnati is represented by Lloyd Bernstein and Richard Williams of Bullivant Houser Bailey PC; and G. David Rubin and Andrew K. Aaronian of Litchfield Cavo LLP.
The case is Papi LLC v. The Cincinnati Insurance Co., case number 3:21-cv-00405, in the U.S. District Court for the District of Oregon.
--Editing by Peter Rozovsky.
For a reprint of this article, please contact reprints@law360.com.
