First Watch Restaurants, whose brunch locations are spread across 29 states, said the district court wrongly relied on the Eleventh Circuit's unpublished opinion in Mama Jo's Inc. v. Sparta Insurance Co. to conclude that its COVID-19-related business interruptions are only economic losses not covered by property insurance policies.
Unlike conventional commercial policies such as that of Mama Jo's, First Watch's "Zurich Edge" policy with Zurich American Insurance Co. doesn't require policyholders to go through a "period of restoration" to show property repairs, the brunch restaurant owner said. The Edge policy just requires losses resulting from suspension of business activities, exactly as its restaurants experienced, it said.
In late March, the U.S. Supreme Court rejected a petition from Mama Jo's, a Florida restaurant owner that asked it to overturn the Eleventh Circuit decision holding that policyholders must show their properties needed repairs to get coverage under their commercial property insurance.
Since last year, federal courts around the country have predominantly sided with insurers, relying on the heavily cited Eleventh Circuit's ruling in the Mama Jo's case to conclude that businesses that suffered during the pandemic cannot get coverage because the policyholders cannot show COVID-19 caused any tangible changes to their properties, or that the properties needed to be repaired or replaced.
In February, a Florida federal judge dismissed First Watch's pandemic loss suit, siding with Zurich that First Watch failed to show any concrete damage but only alleged financial losses.
"Mama Jo's was not binding precedent and is not controlling here because it was an unpublished opinion," First Watch said Monday. "Even if Mama Jo's was a published opinion, it would not be controlling here because it is not a Covid-19 related case, has different policy language than we have here, and did not give meaning to every word in the policy."
The restaurant said Mama Jo's policy defines a covered loss as "risks of direct physical loss," while its Zurich Edge policy describes loss as all risks of direct physical loss of or damage of covered property, so "the wording of that policy was completely different than the wording of the Zurich Edge policy."
"The district court erred by using the analysis of a different policy and applying it here when the language was not equivalent. The court was required to interpret the words chosen by Zurich," First Watch argued.
Additionally, the policy's contamination exclusion does not apply because First Watch has not alleged any physical contamination in its restaurants, the company said. It was not closed due to the actual presence of the virus on its property but "the presence of a virus in the general population," the brunch restaurant owner said.
The owner also asked the Eleventh Circuit to hold an oral argument for its case, saying that will help the court to better understand that the Zurich Edge policy is unique and different from other commercial property policies.
In February, the Florida district court granted Zurich's dismissal motion without holding an oral argument.
Counsel for the parties could not be immediately reached for comment.
First Watch is represented by Bard Daniel Rockenbach and Nichole J. Segal of Burlington & Rockenbach PA and Ryan Kelly Young and Kenneth John McKenna of Dellecker Wilson King McKenna Ruffier & Sos LLP.
Counsel information for Zurich was not immediately available.
The case is First Watch Restaurants Inc. v. Zurich American Insurance Co., case number 21-10671, in the U.S. Court of Appeals for the Eleventh Circuit.
--Editing by Bruce Goldman.
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