By Daphne Zhang

Law360 (July 24, 2020, 11:40 PM EDT) -- Two Michelin Star restaurant groups slapped a Travelers Companies Inc. insurance unit with two lawsuits Friday, seeking declarations that their over $10 million policies should cover their financial losses due to COVID-19.

Fabio Trabocchi Group, trading as Fiola, and RW Restaurant Group told a Maryland federal court and a D.C. federal court in separate suits that The Charter Oak Fire Insurance Co., a Travelers subsidiary, wrongfully denied coverage for their losses from state-mandated closures.

The two groups said their 14 restaurants laid off over 80% of staff during the worst times in the past months. Fiola owns $11 million and RWRG has $10.2 million in revenue and expense coverage with Charter Oak. The groups said they paid over $164,000 and $124,000, respectively, in premiums for their all-risk policies this year.

Charter Oak denied the groups' claims in early April, asserting no physical damage, and citing that the policies exclude virus-related losses and that the pollution and "loss of use" exclusions preclude coverage for revenue loss, according to the complaints.

The Michelin Star restaurants' owners said they were never informed by Charter Oak that for the business income coverage to apply, there needs to be visible physical damage, adding that neither the policies nor the denial letters defined the terms "loss" or "damage." The two suits were filed by the same firms.

Geoffrey Graber, a Cohen Milstein Sellers & Toll PLLC partner representing the Michelin restaurants, said that the policies' virus exclusions for the two restaurant groups need to be read narrowly under the law. "There's no evidence that the virus was present on the premises of any of our clients' covered property," he added.

"If the insurance industry wanted to exclude a pandemic, they could have written that exclusion into the insurance policy. They knew very well how to exclude this coverage," Graber said. "In fact, I have not seen a single one that excludes pandemic."

Kate Thermansen, a spokesperson for Travelers, told Law360 in a statement Friday that Travelers "has to protect the integrity of its contracts."

"This is an enormously difficult situation for individuals and businesses and Travelers is committed to paying covered claims, but it simply cannot pay for losses that a policy expressly excludes," Thermansen said. "We have very specific exclusions stating that losses resulting from a virus or bacteria are not covered."

But the restaurant's attorney Graber said he does not buy into the notion that insurers cannot pay for businesses' losses.

"Businesses all around the country are suffering, leaving millions of Americans unemployed. And here you have the insurance industry sitting on hundreds of billions of dollars in premiums, saying they shouldn't have to pay out a dime. I don't think the courts will agree with that," he told Law360 Friday.

Fabio Trabocchi, an Italian restaurateur of Washington, D.C, co-owns five restaurants in D.C.and one in Virginia. Robert Wiedmaier of RWRG is the majority owner of eight French and Belgian cuisine eateries in Maryland, the District of Columbia and Virginia. The two owners and their restaurants have won multiple regional and national "best restaurants" and "best chef" awards, according to the suits.

In Friday's suit, RWRG said it is only able to support 55 of its previous 425 employees after being ordered to restrict its businesses. The group said the business income coverage it has with Charter Oak covers regular payroll expenses.

"The Charter Oak Fire Insurance Company has put us in a dire situation like many of our peers in the restaurant community, who are struggling to stay afloat. Barely," said Wiedmaier in a statement. "We are pushing back — to put an end to insurers' greed and to their absolute indifference to destroying the restaurant industry nationwide."

Fabio Trabocchi Group employed around 550 people before it shuttered in March. The group raised a disaster relief fund and issued over $150,000 to employees as financial assistance after 80% of them were laid off at one time. The group's six restaurants switched to takeout and delivery service and were able to hire back 50% of its staff, it said. 

"It was painful to tell members of the Fiola, Fiola Mare, Del Mar and Sfoglina families that our insurance company let us down during such a difficult time," said Fabio Trabocchi in a statement.

In the complaints, the two groups cited National Restaurant Association research that American restaurants lost $120 billion in sales during the first three months of the pandemic. "Profit margins in the restaurant industry are slim and, unlike in the insurance industry, reserve funds tend to be low," the restaurants said.

The Michelin restaurant owners are asking the courts to hold that their revenue losses are covered and not precluded by any exclusions of Charter Oak's policies, and demanding damages to be determined in jury trial plus attorney fees.

The restaurant groups are represented by Andrew N. Friedman, Victoria S. Nugent, Julie Selesnick, Geoffrey Graber, Eric Kafka, Karina G. Puttieva and Paul Stephan of Cohen Milstein Sellers & Toll PLLC and Eric H. Gibbs, Andre M. Mura, Barth Menzies, Amy M. Zeman and Steve Lopez of Gibbs Law Group.

Counsel information for Travelers could not be immediately determined.

The cases are FT DC LLC et al. v. The Charter Oak Fire Insurance Co., case number 1:20-cv-02026, in the U.S. District Court for the District of Columbia; and RW Restaurant Group LLC et al. v. The Charter Oak Fire Insurance Co., case number 8:20-cv-02161, in the U.S. District Court for the District of Maryland.

--Editing by Bruce Goldman.

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