The parties filed papers indicating they had agreed to end their dispute over whether Zurich owes the restaurant chain for losses resulting from the virus and related government shutdowns, and the judge signed off on Thursday, court filings show.
Steak 'n Shake sued Zurich unit American Guarantee and Liability Insurance Co. just two weeks ago, arguing that the insurer breached its contract with the restaurant chain when it refused to cover COVID-19 losses. The restaurant chain insisted that its locations have been damaged and that it suffered a loss as a result of suspending its onsite operations.
Indiana-based Steak 'n Shake said it purchased a $10 million policy from American Guarantee and Liability Insurance Co. that covered March 2020 through March 2021. The policy covers "all risks of direct physical loss of or damage from any cause" unless specifically excluded, according to Steak 'n Shake.
Steak 'n Shake owns 238 restaurant locations, 31 of which are in Ohio, it said. Starting in March 2020, the company was forced to shutter its restaurants across the country to comply with public health orders as the virus ravaged the U.S.
The restaurant chain asked the court to enter a declaratory judgment finding that Zurich must cover Steak 'n Shake's pandemic losses.
Two days after the suit was filed, the Zurich unit lobbed its own counterclaim against Steak 'n Shake, arguing that a contamination exclusion within the policy bars coverage. The unit also sought a judgment in its favor.
Counsel for Steak 'n Shake responded to the counterclaim on Wednesday, reasserting the allegations it previously raised.
But a day later, both Steak 'n Shake and the insurer moved to dismiss the suit with prejudice in regards to all claims and causes of action. U.S. District Judge J. Philip Calabrese granted the bid to ax the suit on the same day.
A settlement was not mentioned in the parties' motion, though both entities did agree to bear the cost of their respective attorney fees.
Insurers are currently contending with a mountain of pandemic coverage litigation. As of February, policyholders had filed more than 1,500 suits over insurance coverage stemming from the pandemic, according to a COVID-19 coverage litigation tracker from the University of Connecticut's Insurance Law Center. More than 122 of those suits were filed against Zurich.
Steak 'n Shake isn't the only restaurant to sue its insurer over coronavirus-related losses.
A number of Chicago restaurants sued Society Insurance Inc. in early April in a bid to seek coverage for losses stemming from the pandemic. Those restaurants insisted that the presence of the coronavirus on, or near, their premises created dangerous conditions that rendered the spaces "unsafe and unfit for its intended use," and that such a loss qualifies them for coverage under their insurance policies.
However, not all restaurants seeking pandemic-related business interruption losses have been successful in their litigation. In March, a virus exclusion ended a New Jersey ice cream shop's attempt to get its COVID-19 losses covered.
Representatives for the parties did not immediately respond to requests for comment Thursday.
Steak 'n Shake is represented by Tracey S. McGurk, Edward O. Patton and Brendon P. Friesen of Mansour Gavin LPA.
The Zurich unit is represented by Kevin M. Young of Tucker Ellis LLP.
The case is Steak 'N Shake Inc. v. American Guarantee & Liability Insurance Co., case number 1:21-cv-00795, in the U.S. District Court for the Northern District of Ohio.
--Additional reporting by Hailey Konnath. Editing by Daniel King.
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