Hartford Defeats Pa. Restaurants' Pandemic Coverage Suit

The owners of Pennsylvania restaurants Stove and Tap and Al Pastor can't force the Hartford to pay for losses from pandemic-related closure orders, a federal judge ruled, saying the mere threat of COVID-19 isn't a physical loss or damage triggering coverage.

U.S. District Judge Mitchell S. Goldberg said Wednesday that the restaurants aren't covered as they admit the coronavirus wasn't present at their locations. And government shutdown orders didn't cause the properties to be either "uninhabitable or unusable for their intended purpose," the judge added.

"I am fully aware that my ruling may unfortunately present an obstacle in the path to recovery for plaintiffs' businesses. That said, I must, of course, reach the result that is consistent with the insurance contracts at issue and applicable jurisprudence," Judge Goldberg said, dismissing the suit.

The proposed class suit was filed in April 2020 by owners of Stove and Tap and Al Pastor, restaurants with locations in Lansdale, Malvern and Exton, Pennsylvania. The owners alleged the Hartford Financial Services Group Inc. was on the hook for business interruption losses from the pandemic.

In Wednesday's ruling, Judge Goldberg said he agreed with the growing consensus among his colleagues that the pandemic has caused "significant financial hardships" for small businesses but that their losses weren't caused by a physical loss or damage under all-risk insurance policies.

For Stove and Tap and Al Pastor, Judge Goldberg said these restaurants only had their operations limited for a temporary period of time as Democratic Gov. Tom Wolf allowed restaurants to continue offering "carryout, delivery and drive-through food and beverage service" under certain measures.

The owners haven't alleged the coronavirus was detected at any neighboring properties, according to the judge. Rather, the closure orders were issued to prevent the spread of COVID-19 to any property, he said, finding the restaurants can't tap into either their business income or civil authority coverages. COVID-19 is the respiratory disease caused by the virus.

While the Hartford policy included a virus exclusion, Judge Goldberg declined "to add yet another voice to the already saturated chorus of jurisprudence on the impact" of that exclusion. The judge said the exclusion, which has been held to bar coverage for COVID-19 losses, is on appeal to the Third Circuit.

Policyholders with business interruption suits in the Eastern District of Pennsylvania have faced an uphill climb to recover for losses. Of the 29 cases filed, the district has awarded insurers wins in all but one, according to data from the University of Pennsylvania's COVID Coverage Litigation Tracker.

Just this year, Pennsylvania federal judges in the Eastern District dismissed suits brought by the operators of two dozen hotels, the owners of wine bars and a bowling alley over their losses from the pandemic.

Representatives of the restaurants and the Hartford didn't respond to requests for comment Thursday.

The restaurants are represented by Daniel E. Bacine, Mark R. Rosen, Jeffrey A. Barrack, Meghan J. Talbot and Stephen R. Basser of Barrack Rodos & Bacine.

Hartford is represented by Richard D. Gable Jr. of Butler Weihmuller Katz Craig LLP and by Sarah D. Gordon of Steptoe & Johnson LLP.

The case is Lansdale 329 Prop LLC et al. v. Hartford Underwriters Insurance Co., case number 2:20-cv-02034, in the U.S. District Court for the Eastern District of Pennsylvania.

--Additional reporting by Daphne Zhang. Editing by Vincent Sherry. 


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