By Shawn Rice

Law360 (March 30, 2021, 8:42 PM EDT) -- Rooms To Go has urged the Eleventh Circuit to save its suit against Aspen Specialty Insurance Co. and others over whether the pandemic and government orders caused a physical loss to its property, saying "in baseball, a tie goes to the runner; in Florida insurance cases, a tie goes to the policyholder."

R.T.G. Furniture Corp., which operates over 150 furniture stores, said in Monday's opening brief that U.S. District Judge James S. Moody Jr. got it wrong under Florida law by finding the COVID-19 pandemic and government orders did not cause a physical loss triggering coverage under 14 policies.

The presence of COVID-19 and the stay-at-home orders caused a direct physical loss to the company's property because the furniture retailer could not use the space, the company said. And if the policy language is at all ambiguous, the court should rule in favor of the policyholder, the company told the appeals court.

"So long as the policyholder can put forth a reasonable interpretation providing coverage, that interpretation controls — either because the policyholder's interpretation is the only reasonable one, or because, if the insurer also puts forth a reasonable interpretation, the tie goes to the policyholder," Rooms To Go said.

Last October, Rooms To Go sued its insurers in the Middle District of Florida, arguing that they are responsible for losses from closing certain stores based on positive COVID-19 tests for employees and customers. Stay-at-home orders also caused the furniture chain to lose revenue, according to the suit.

Judge Moody sided with the insurers in a January order, dismissing the business interruption suit with prejudice. Rooms To Go does not allege a "direct physical loss or damage" to its stores caused by the presence of the coronavirus or government shutdown orders to trigger coverage, the judge ruled.

"Common sense tells us that COVID-19 is incapable of causing a tangible injury to property. COVID-19 is a virus that harms people, not structures," the judge said, finding discovery would not change that point.

Rooms To Go said in Monday's brief that Judge Moody should not have made a factual ruling at the motion to dismiss stage on whether the presence of the coronavirus caused a physical loss to its stores.

"Rooms To Go pleaded that COVID-19 attaches to property. It pleaded that a person can become infected with COVID-19 by touching a surface or object that has the virus on it, and then touching their own mouth, nose, or eyes. It pleaded that COVID-19 was actually present on its property. And it pleaded that as a result, its property was unusable," the furniture chain told the Eleventh Circuit.

Finally, the insurers can't escape coverage under an exclusion for contamination and pollution, Rooms To Go argued, noting there is no standalone virus exclusion in the policies. The exclusion applies to viruses included in the listed acts and U. S. Environmental Protection Agency regulations, the policyholder said.

"The exclusion itself includes an exception, and COVID-19 and the stay-at-home orders fall into that exception," Rooms To Go said. "The loss of use or damage caused by COVID-19 and the stay-at-home orders is a covered peril."

The Eleventh Circuit is currently hearing appeals from Florida and Georgia restaurants in their suits over business interruption losses caused by the COVID-19 pandemic and government orders.

The Florida eatery asked the appellate court to revive its proposed class action and certify questions to the state's high court over the "direct physical loss" issue. The Georgia restaurant said to the Eleventh Circuit that its policy's ambiguity on what "loss of property" means should have been decided in its favor.

Counsel for Evanston Insurance Co. declined to comment on Tuesday.

Representatives for the other parties did not respond to requests for comment.

Rooms To Go is represented by Walter J. Andrews and Cary D. Steklof of Hunton Andrews Kurth LLP.

Aspen, Crum & Forster Specialty Insurance Co. and Everest Indemnity Insurance Co. are represented by Matthew L. Gonzalez, Christine Michelle Renella and Kristian N. Smith of Zelle LLP.

Evanston is represented by Bennett Evan Cooper and Alan J. Perlman of Dickinson Wright PLLC.

Hallmark Specialty Insurance Co. is represented by Antonio D. Morin and Gideon Reitblat of Akerman LLP.

Homeland Insurance Company of New York is represented by Patricia Anne McLean of Phelps Dunbar LLP.

Maxum Indemnity Co. is represented by Jonathan Freiman of Wiggin & Dana LLP.

The case is R.T.G. Furniture Corp. v. Aspen Specialty Insurance Co. et al., case number 21-10490, in the U.S. Court of Appeals for the Eleventh Circuit.

--Additional reporting by Daphne Zhang and Emily Sides. Editing by Peter Rozovsky.

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