U.S. District Judge Susan D. Wigenton, in a four-page opinion, said the business interruption losses for the owners of over 120 franchises caused by the coronavirus pandemic and government shutdown orders didn't trigger coverage because the businesses hadn't sufficiently shown there was any physical loss or damage to their properties.
The businesses claimed that the COVID-19 virus was present on the surfaces and in the air at the franchise properties, but the judge ruled that isn't enough to show a loss or damage under the American Guarantee insurance policy.
The franchise owners, known collectively as The Briad Group, sued American Guarantee in October saying the insurer wrongfully denied coverage for losses tied to government shutdown and stay-at-home orders. American Guarantee pushed back arguing there was no "direct physical loss of or damage" to the properties.
In Wednesday's opinion, Judge Wigenton expressed sympathy for the franchise group but said restaurants were considered "essential" business that could remain open but under protective guidelines.
Judge Wigenton, in a footnote, said the franchise group wouldn't be able to recover from the insurer for their losses because the policy has a contamination exclusion barring coverage for viruses.
This month has seen a mix bag in rulings for New Jersey. A chiropractic center avoided dismissal in its proposed class action over coverage for losses suffered during the COVID-19 pandemic.
However, a New Jersey judge tossed a proposed class action by restaurants in the Garden State, Delaware, Florida and Washington because their policies' virus exclusions barred coverage. And, a New Jersey gym also saw its pandemic coverage suit dismissed as a result of the virus exclusion.
Representatives for the insurer declined to comment. Counsel for the franchise group didn't respond to requests for comment.
The franchise companies are represented by Joshua L. Mallin and Dennis T. D'Antonio of Weg & Myers PC and Philip Rosenbach of Berman Rosenbach LLC.
American Guarantee is represented by Susan M. Kennedy and Michael Menapace of Wiggin and Dana LLP.
The suit is Manhattan Partners LLC et al. v. American Guarantee and Liability Insurance Co., case number 2:20-cv-14342, in the U.S. District Court for the District of New Jersey.
--Additional reporting by Joyce Hanson, Hailey Konnath, Carolina Bolado and Lauren Berg. Editing by Amy Rowe.
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