By Daphne Zhang

Law360 (May 5, 2021, 6:39 PM EDT) -- Two national insurance company trade groups have thrown their support behind the Cincinnati Insurance Co. in its Seventh Circuit coverage fight over a steakhouse and brewery operator's COVID-19 losses, arguing Wednesday that all-risk policies do not cover pure economic losses.

American Property Casualty Insurance Association and National Association of Mutual Insurance Companies said commercial property insurance policies only pay for losses related to natural disasters like fires and hurricanes and were never intended to cover "economic losses untethered to physical loss or physical damage."

"Insurers are not, and cannot be, guarantors against the consequences of all unfortunate events that impact society at large," the trade groups said.

In the amicus brief, the groups, which have thousands of insurance company members, said getting carriers to cover pandemic losses would not honor insurance contract language, "open the floodgates" to all kinds of unearned claims, and "subject insurers to overwhelming claim payment liability that would threaten their solvency."

Last week, Cincinnati asked the Seventh Circuit not to revive the steakhouse and brewery operator's COVID-19 business interruption suit, saying a majority of decisions in Illinois and across the country have held that government orders don't cause a physical loss or damage to property.

TJBC Inc., which owns 4204 Main Street Brewing Co., appealed to the Seventh Circuit the dismissal of its suit over pandemic-related losses in March. In a January ruling, a lower court had held that COVID-19 didn't cause a physical loss or damage to the Belleville, Illinois, restaurant as there wasn't any physical alteration to its property.

TJBC has argued to the Seventh Circuit that its inability to use the restaurant as intended is a covered loss. The company filed an amended complaint last August, arguing that the insurer must cover the damage it suffered during the pandemic. Government orders forced the owner to shut down its steakhouse and brewery, according to the suit, resulting in loss of revenue from being unable to offer indoor dining.

On Wednesday, the trade groups sided with Cincinnati by saying that state closure orders restricted the congregation of people but didn't cause any physical loss or damage triggering coverage. Forcing insurers to pay uncovered financial losses resulting from the pandemic would "subject insurers to overwhelming claim payment liability that would threaten their solvency," they added.

The trade groups also cited a May 2020 National Association of Insurance Commissioners statement saying that "requiring insurers to cover businesses' uninsured economic losses from the pandemic would create substantial solvency risks for the insurance sector."

Additionally, the groups said, physical alterations such as moving tables and chairs that the restaurant owner said it took to ensure social distancing do not trigger coverage because such alterations do not create tangible physical damage to property and do not cause suspension of operations as the policy requires, APCIA and NAMIC said.

Representatives for the parties could not be immediately reached for comment. 

The trade groups are represented by Wystan M. Ackerman of Robinson & Cole, Laura Foggan of Crowell & Moring LLP and Dan Millea of Zelle LLP. 

TJBC is represented by Jason Barnes, Ted Gianaris and Eric S. Johnson of Simmons Hanly Conroy.

Cincinnati is represented by Daniel G. Litchfield, Alan I. Becker and Brian M. Reid of Litchfield Cavo LLP.

The case is TJBC Inc. v. The Cincinnati Insurance Co., case number 21-1203, in the U.S. Court of Appeals for the Seventh Circuit.

--Editing by Bruce Goldman.

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