Insurers Want Golden Corral Franchisees' COVID Suit Tossed

By Eli Flesch
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Law360 (June 11, 2021, 3:27 PM EDT) -- Three insurers to a group of Golden Corral buffet owners have told an Iowa federal court that the restaurants aren't entitled to coverage of losses they sustained during the COVID-19 pandemic, citing a series of virus exclusions in their policies.

In three similar dismissal requests, the insurers said Thursday that virus exclusions in their policies with the restaurateurs unambiguously precluded coverage for losses stemming from government restrictions intended to curb the spread of the coronavirus.

The insurers are Nationwide Mutual Insurance Co., Allied Insurance Co. of America and Depositors Insurance Co. They are hoping to toss cases brought by owners of Golden Corral restaurants in Kansas, Illinois, Arizona and California, court documents showed.

The virus exclusions in the Golden Corral policies bar coverage for losses that result either directly or indirectly from viruses, the insurers said, adding that because government orders were issued in response to the virus, the exclusion applied to them.

"As recognized by courts in Illinois, Arizona, and across the country, the plain language of the virus exclusion bars plaintiffs' claims for coverage," one of the dismissal bids said.

In March, the restaurants alleged that they had no knowledge that the coronavirus might be present in any of their restaurants, or that any staff member might have contracted the virus, according to court documents. On Thursday, the insurers described that as an attempt to sidestep the virus exclusion in their policies.

The restaurants also claimed there were no exclusions specifically for covered causes of loss caused by a pandemic.

"Numerous courts have considered this precise issue and nearly universally held that because COVID-19's outbreak was the reason for the state-imposed closure orders, economic losses resulting from the suspension of business operations were caused by or resulted from COVID-19 — which is a virus," the insurers said, referring to the respiratory ailment caused by the coronavirus.

In their March filing, the restaurateurs said that their policies were ambiguous as they related to the requirement of physical loss or damage required for coverage. They said their insurers failed to follow basic rules of English grammar and semantics.

The insurers didn't heed much of this argument. In a footnote, they said that the exclusions in their policies were so clear that whether the restaurants adequately showed physical loss or damage wasn't something the court needed to consider.

Policyholders have generally fared poorly in federal disputes over pandemic coverage. Over 80% of such suits have been permanently dismissed, according to data from the University of Pennsylvania Carey Law School. Out of over 200 federal suits that concern a virus exclusion, only 10 have survived a motion to dismiss, the data showed.

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.

--Editing by Robert Rudinger.

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