American Foods Systems Inc. and related restaurants in Andover, Arlington, Lexington, Saugus, Shrewsbury and Waltham told the appeals court Monday that U.S. District Judge Richard G. Stearns misinterpreted the policy's coverage requirement of "direct physical loss or damage to property."
The restaurants asked the First Circuit to reverse the decision and rule that the language does cover coronavirus losses.
They aimed in their opening brief to convince the appeals court that Judge Stearns mistakenly interpreted the pandemic losses — ranging from capacity limits to complete closures — as "transient phenomena of no lasting effect" on the businesses.
"There is no exclusion or limitation in the policy relative to transient phenomena and no lay person would think that about the policy," the restaurants said. "Likewise, no reasonable lay person would imagine their coverage was predicated on some enduring impact to the actual integrity of any covered property."
From the central finding that physical loss or damage can't cover the presence of a virus, Judge Stearns in March dismissed the suit seeking coverage under the restaurants' all risk policies from Fireman's Fund and Allianz Global Risks United States Insurance Co.
Five other business interruption lawsuits filed in Massachusetts federal court have been dismissed, according to a database maintained by the University of Pennsylvania Carey Law School. The other suits include attempts to get pandemic costs from insurers for an Arizona crystal shop, a restaurant in Boston's Back Bay neighborhood, Japanese-style and Spanish and Portuguese seafood restaurants in Boston, the Legal Sea Foods restaurant chain, and a commercial property owner.
Four of the dismissals, including American Food Systems', are currently being appealed, according to the database.
The restaurant owners led by American Food Systems Inc. filed an amended complaint in January, saying the insurers wrongfully denied coverage for losses resulting from the COVID-19 pandemic. The owners brought claims for breach of contract, bad faith and a violation of Massachusetts' law on unfair trade and deceptive practices.
The owners argued there was a risk of the coronavirus being present at their restaurants at all times. But the insurers said this was "a kitchen sink approach" to seeking coverage.
Representatives for the parties were not immediately available for comment Tuesday.
The restaurants are represented by Evan K. Buchberger of Sweeney Merrigan Law LLP and Allan Kanner and Cynthia G. St. Amant of Kanner & Whiteley LLC.
The insurers are represented by Brett Solberg of DLA Piper LLP.
The case is American Food Systems Inc. et al. v. Fireman's Fund Insurance Co. et al., case number 21-1307, in the U.S. Court of Appeals for the First Circuit.
--Additional reporting by Shawn Rice. Editing by Alyssa Miller.
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