By Shawn Rice

Law360 (March 31, 2021, 9:41 PM EDT) -- The owner of the Freebirds World Burrito chain slapped Zurich American Insurance Co. on Wednesday with a Florida federal countersuit alleging the insurer is on the hook for $100 million in coverage for pandemic-related losses to its restaurants nationwide.

Tavistock Restaurants Group LLC alleged there was a "direct physical loss or damage" from the inability to use its 67 Tex-Mex restaurants and 20 high-end restaurants, which should have triggered insurance coverage. Each location had to reduce operations, make changes or repairs to its property, and limit the number of guests, according to the owner.

To this day, the restaurants continue to lose revenue from the different phased reopenings in certain states, the company said.

"The probability and risk of illness prevents the use of the space in no less of a way than a hurricane could render the interior space of a business unusable," Tavistock said. "Under any circumstance, the loss of functionality of the space for business purposes exists. It is the diminishment of Tavistock's ability to use its physical space; what could once hold many now can safely hold only a few, or no one."

The restaurant owner alleged Zurich wrongfully denied coverage under its all-risk policy for the business interruption losses connected to the government orders to close to stop the spread of the coronavirus.

In July, Zurich sued Tavistock in the Middle District of Florida, alleging the losses at its more than 80 restaurant locations across the country weren't covered and seeking a ruling from the court that it shouldn't have to pay up. The presence of the coronavirus and government orders didn't cause a "direct physical loss to or damage of" the restaurants, the insurer said.

The coronavirus itself is barred under the policy's exclusion for contamination, Zurich argued.

U.S. District Judge Paul G. Byron refused in March to toss Zurich's suit or transfer it to an Illinois federal court where an identical suit brought by Tavistock against the insurer is pending. Out of the number of restaurants, the judge said seven were located in Florida and only one was in Illinois. Freebirds was founded in Santa Barbara, California, and is headquartered in Austin, Texas, according to the company's website.

In Wednesday's counterclaims, the burrito seller said that the very act of its continued operation creates a risk of the virus spreading, and that its efforts to stop that have come at a cost to the company. 

"Despite these measures, the risk of the presence of SARS-CoV-2 at, in, on, and around the restaurants still freely exists each and every time an employee or patron enters the premises and removes his or her mask to eat, indeed the very purpose a restaurant serves," Tavistock said.

Tavistock also argued Zurich didn't include an exclusion for viruses or infectious diseases. The insurer can't escape coverage under a contamination exclusion, which doesn't mention the word "virus," the owner said.

Zurich has been battling business interruption suits across the country. In March, the insurer was hit with suits by a slew of New Jersey hospitals, the fashion giant behind luxury brands like Versace, the maker of Pyrex and Instant Pot, Planet Hollywood's owner and the Great Wolf Lodge resort chain.

However, Zurich has also escaped coverage for these types of business interruption suits. A New Jersey federal judge ruled the virus exclusion in a Zurich policy barred a Ford dealership's pandemic-related losses. A Georgia federal judge sided with Zurich, finding a restaurant management group didn't allege "direct physical loss of or damage to" its properties caused by the pandemic and government orders.

Representatives for Zurich declined to comment Wednesday.

Representatives for Tavistock didn't respond to requests for comment.

Zurich is represented by Lisa Anne Pach of Strook Strook & Lavan and Shari L. Klevens of Dentons US LLP.

Tavistock is represented by John F. Romano of Romano Law Group and Antonio M. Romanucci, David A. Neiman and Gina A. DeBoni of Romanucci and Blandin LLC.

The case is Zurich American Insurance Co. v. Tavistock Restaurants Group LLC, case number 6:20-cv-01295, in the U.S. District Court for the Middle District of Florida.

The related case is Tavistock Restaurants Group LLC v. Zurich American Insurance Co., case number 1:20-cv-04364, in the U.S. District Court for the Northern District of Illinois.

--Additional reporting by Daphne Zhang, Hailey Konnath, Celeste Bott and Carolina Bolado. Editing by Bruce Goldman.

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