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Law360 (June 10, 2021, 6:54 PM EDT) -- A pair of Travelers units asked the Ninth Circuit to reject bids from two Los Angeles luxury restaurants to revive their COVID-19 business interruption lawsuits, arguing that the policies' virus exclusions and their property insurance do not cover pandemic-related losses.
Travelers Indemnity Co. of Connecticut and Travelers Property Casualty Co. of America on Wednesday asked the appellate court to uphold the lower court's ruling against two downtown Los Angeles restaurants' efforts to get COVID-19-related loss coverage.
"Property insurance insures property; if the property is not lost (such as by theft) or damaged (such as by fire), there cannot be a covered claim," the carriers said.
Travelers said the policies cover only "direct physical loss of or damage to property" such as when a fire damages the insured property, resulting in a suspension of operations. But the two luxury restaurants fail to show that anything "direct" or "physical" happened to their properties but alleged only financial losses, the insurer said.
Additionally, the government closure orders neither damaged nor destroyed the eateries' properties, Travelers said, and under California law, "direct physical loss" means some "distinct, demonstrable, physical alteration of the property." The restaurants did not have to repair or replace any facilities or equipment, the insurers said.
Last month, the two California restaurants urged the Ninth Circuit to revive their lawsuits against Travelers in two separate briefs. Mark's Engine Co. No. 28 Restaurant, which serves American comfort food, and 10e Restaurant, a Mediterranean cuisine eatery, said their Travelers policies' virus exclusions are not triggered because they "never detected any virus on the property."
The virus exclusion, which was not designed to bar losses related to civil authority closure orders, only precludes coverage when a loss results from "on-site outbreaks or contamination where a virus is detected," the two restaurants said in May. The two eateries' suits were dismissed by the Central District of California last August and October.
"The virus exclusion unambiguously excludes coverage for all losses caused by or resulting from viruses, and [the restaurants'] alleged losses resulted from the coronavirus," Travelers said on Wednesday.
Additionally, contrary to what the restaurants alleged, the government orders never cut access to the eateries, which were able to offer delivery and takeout services during the lockdown, the insurer said, so they are not entitled for civil authority coverage.
In the briefs, Travelers asked the Ninth Circuit to recognize the "overwhelming consensus" of courts throughout the country who have dismissed similar COVID-19 business interruption claims by holding that the virus exclusion bars pandemic-related losses.
Representatives of the parties could not be immediately reached for comment.
The two restaurants are represented by Mark John Geragos of Geragos and Geragos APC.
Travelers is represented by Deborah L. Stein of Gibson Dunn and Crutcher LLP.
The cases are Marks Engine Company No. 28 Re v. Travelers Property Casualty Co. et al., case number 20-56031; and 10E LLC v. The Travelers Indemnity Co. et al., case number: 20-56206, both in the U.S. Court of Appeals for the Ninth Circuit.
--Editing by Rich Mills.
For a reprint of this article, please contact reprints@law360.com.
