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Law360 (June 24, 2020, 5:05 PM EDT ) Philadelphia's Marathon restaurant group is demanding that State Auto Insurance cover loss-of-business and cleanup costs stemming from the COVID-19 pandemic, according to a lawsuit filed in Pennsylvania state court.
The Marathon Grill Inc. and its related companies said their restaurants had suffered physical damage from having to disinfect them and lost business due to state and city lockdown orders to reduce the spread of the highly contagious coronavirus.
"As a result of several orders and proclamations of the governor, the mayor, the [Philadelphia health] commissioner and the [Pennsylvania health] secretary acting as civil authorities, the plaintiffs were compelled to shut their restaurants and cease business, which has continued to the present day and will likely continue into the indeterminate future," the complaint said. "Plaintiffs have had to close their restaurants and will have to keep their restaurants closed, or at best have them opened in a limited manner."
In the lawsuit filed Monday in the Philadelphia Court of Common Pleas, Marathon sought a declaratory judgment that its losses should be covered, and made claims for breach of contract and bad faith against State Automobile Insurance Co. and State Auto Insurance Companies. In addition to coverage of its claims, the restaurants sought punitive damages, interest and attorneys' fees.
Marathon and its related companies run three restaurants in Philadelphia and had remained open up until Pennsylvania Gov. Tom Wolf's March 6 order closing "non-life-sustaining" businesses, including dine-in services at bars and restaurants.
"Notwithstanding the COVID-19 pandemic as of March 6, 2020, the plaintiffs intended to continue to operate their restaurants while taking safety precautions," the complaint said. The restaurants were further hobbled by a March 23 stay-at-home order, which prevented "persons who would otherwise have been patrons of plaintiffs' restaurants… from patronizing them."
Those orders were backed up by orders from Philadelphia Mayor James Kenney, city Health Commissioner Thomas Farley, and state Health Secretary Rachel Levine, the suit said. But Marathon said its restaurants may have been contaminated by the virus prior to their closure, so they needed to incur expenses for cleaning and disinfection.
"Having been open to the public for business up to and including March 6, 2020, during which time the spread [of the virus] was well documented, ... contamination of the plaintiffs' properties, equipment, fixtures, goods and supplies was likely," the complaint said. "Contamination of the plaintiffs' properties, equipment, fixtures, goods and supplies is real physical loss ... and physical damage … which plaintiffs have had to clean up and remove."
The restaurants had policies with State Auto that included coverage for business income losses, extra expenses and pollutant cleanup, but when they submitted claims to State Auto, the insurer allegedly rejected the claims without investigation, the suit said.
Marathon said State Auto sent back a 15-page letter denying the restaurants' claims on April 24, but didn't respond to a May 4 letter reiterating the claims.
"Plaintiffs aver and therefore believe that the defendants failed to undertake any steps to investigate the plaintiffs' claims, but instead had established a policy of denying claims due in whole or in part or arising out of the novel coronavirus infestation, of which plaintiffs were a part," the complaint said.
Counsel for Marathon declined to comment.
Representatives of State Auto did not immediately respond to requests for comment Wednesday.
Marathon is represented by Mark S. Kancher of The Kancher Law Firm LLC.
Counsel information for State Auto was not immediately available.
The case is The Marathon Grill Inc. et al. v. State Automobile Mutual Insurance, case number 200600918, in the Court of Common Pleas for Philadelphia, Pennsylvania.
--Editing by John Campbell.
For a reprint of this article, please contact reprints@law360.com.
