By Eli Flesch

Law360 (May 6, 2021, 10:11 PM EDT) -- An Alabama federal judge threw out two separate COVID-19 coverage bids brought by a hotel operator and a clothing store owner, saying they failed to show that virus particles caused any insurable damage.

U.S. Magistrate Judge Gray M. Borden said on Wednesday that properties contaminated with virus particles need only a routine cleaning, not the fixing or repairing for buildings that have been physically damaged, a requirement for coverage in the businesses' policies.

The finding adopts a line of reasoning insurers have put forward in recent months to avoid paying out claims for pandemic losses, in these cases shutting down claims by Dukes Clothing LLC and Ascent Hospitality Management Co. LLC.

To succeed in their fights for coverage, the businesses would have had to "shoehorn" the meaning of cleaning and disinfecting into the ordinary definition of repairs, Judge Borden said. But he called that proposition unreasonable, dealing wins to Dukes' insurer — the Cincinnati Insurance Co. — and Ascent's — the Employers Insurance Co. of Wausau and Liberty Mutual Insurance Co.

"While COVID-19 particles are a physical manifestation of the virus, Dukes Clothing has not alleged that they caused physical harm to property within the meaning of the policy," Judge Borden said, writing the very same for Ascent in the other decision.

The twin losses for Dukes and Ascent add to the lion's share of coronavirus coverage suits that have been resolved in favor of insurers in federal court. More than 90% of such cases were dismissed, and more than 80% permanently so, according to judicial data compiled by the University of Pennsylvania Carey Law School.

Insurers successfully argued that coverage doesn't apply to buildings that can simply be disinfected by household cleaners. In early April, a California federal magistrate judge used that reasoning to side with Sentinel Insurance Co. Ltd. in its dispute with two acting and modeling schools. Insurers for the Philadelphia Eagles football team and two Missouri universities also argued that point last month.

Cincinnati, in its request to toss Dukes' case last year, pointed to an Eleventh Circuit decision, Mama Jo's v. Sparta Insurance , which found no insurable damage was done to a restaurant filled with debris from a nearby construction site, because routine cleaning resolved the problem. The U.S. Supreme Court declined to disturb that ruling in March.

Judge Borden found that argument persuasive in both of his decisions, according to the rulings.

In his decisions, Judge Borden also said that government-mandated restrictions put in place during the pandemic didn't have the effect of physically altering any business location, and so they didn't create a reason for insurance coverage.

Both Dukes and Ascent were forced to close businesses because of government-mandated restrictions in Alabama, they said in complaints filed last year.

Dukes, a family-owned women's clothing store with three locations in Birmingham, Tuscaloosa and Athens, Georgia, first opened in 2016, according to its website. Ascent operates a national portfolio of 30 hotels that include Marriott, Hilton and Hampton Inn locations in Alabama and across the South, with additional hotels in Indiana.

Judge Borden hit Ascent in particular for a contamination exclusion in its policy with Wausau and Liberty Mutual. Even if Ascent were able to show its hotels were physically damaged by virus particles, that exclusion would have barred coverage, Borden said.

"The entirety of the policy language confirms that direct physical loss or damage requires an actual physical change to property that COVID-19 particles cannot cause," Judge Borden wrote in both decisions.

Counsel for Wausau and Liberty Mutual declined to comment on the outcome. Counsel for the other parties did not immediately respond to requests for comment.

Cincinnati Insurance is represented by Augusta S. Dowd of White Arnold & Dowd PC.

Dukes is represented by Matt Glover of Prince Glover Hayes, Ted Colquett of Colquett Law LLC, and William H. Robertson V of Gaither & Robertson.

Wausau and Liberty Mutual are represented by Joshua B. Baker and Joshua R. Hess of Maynard Cooper & Gale PC, and Melissa D'Alelio and Pamela E. Berman of Robins Kaplan LLP.

Ascent is represented by James S. Williams and Alyse N. Windsor of Sirote & Permutt PC.

The cases are Dukes Clothing LLC v. The Cincinnati Insurance Co., case number 7:20-cv-860, and Ascent Hospitality Management Co. v. Employers Insurance Co. of Wausau et al., case number 2:20-cv-770, in the U.S. District Court for the Northern District of Alabama.

--Additional reporting by Daphne Zhang, Shawn Rice and Melissa Angell. Editing by Adam LoBelia.

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