The owners of Golden Corral restaurants in Kansas, Illinois, Arizona and California said their insurance policy language was ambiguous and failed to define critical terms such as "direct physical loss of or damage to" a property, contending that they are entitled to the "broadest coverage" under the all-risk policy.
When policy language is unclear, it must be construed liberally in favor of the policyholder based on Arizona and Illinois insurance contract interpretation principles, the buffet owners said.
Earlier this month, the restaurants' three insurers, Nationwide Mutual Insurance Co., Allied Insurance Co. of America and Depositors Insurance Co., said the policies' virus exclusions preclude all damages that result either directly or indirectly from viruses.
The language of the virus exclusions is so clear that the court need not consider whether the restaurants adequately showed physical loss or damage, the carriers said. Because government orders were issued in response to the virus, the exclusions applied to them, they said.
In March, the restaurants said they had had no knowledge that the coronavirus might be present in any of their restaurants, or that any staff member might have contracted the virus, so the virus exclusions are never triggered, according to court documents. The insurers had called that argument an attempt to sidestep the virus exclusion in their policies.
On Thursday, the buffet owners said: "There is no claim or allegation that Plaintiffs' Insured Premises was closed as the result of the known or confirmed presence" of the COVID-19 virus. "Rather, Plaintiffs' claim was based solely on the forced closure of their restaurants in response to [government orders]."
The owners urged the court to recognize that "nearly half of state courts, as compared to federal courts, ruling on business interruption claims and applying state law have been decided in favor of the insured."
They demand that the court grant oral argument and said further discovery was necessary for the court to effectively and thoroughly interpret the policies.
Representatives for the parties could not immediately be reached for comment.
The Golden Corral owners are represented by James W. Carney, Nick J. Mauro and Jasper P. Verhofste of Carney & Appleby PLC.
The insurers are represented by Alex E. Grasso of Hopkins & Huebner PC.
The case is Mohave GC LLC et al. v. Depositors Insurance Co. et al., case number 4:21-cv-00119, in the U.S. District Court for the Southern District of Iowa.
-- Additional reporting by Eli Flesch. Editing by Peter Rozovsky.
For a reprint of this article, please contact reprints@law360.com.