Judge: Insurance policy doesn’t cover Aspen restaurant’s losses from pandemic
A federal judge last month dismissed an Aspen restaurant’s lawsuit seeking insurance coverage for business interruptions in 2020 caused by public health orders and shutdowns.
That means the owner of L’Hostaria Ristorante in Aspen won’t be covered for financial losses stemming from the COVID-19 pandemic, after a federal judge Sept. 21 ruled in favor of defendant Cincinnati Insurance Co.’s motion to dismiss the suit.
In his written ruling, U.S. District Judge William J. Martinez noted viral contamination at the restaurant did not constitute physical damage to the restaurant property under the terms of its insurance coverage. A majority of courts in the U.S. have sided with defendant insurance companies that have been sued for denying businesses coverage for financial losses brought on by pandemic-related health orders, Martinez’s ruling said.
“Numerous courts throughout the nation — including those within the Tenth Circuit — have held that potential contamination by the COVID-19 virus does not constitute physical damage as contemplated by insurance policy language,“ said the ruling.
The judge said he was not persuaded to go in another direction: “The Court can discern no reason to deviate from such conclusion, and similarly finds that COVID-19 contamination is not physical damage as covered by the Policy.”
Under its corporate name Sagome Inc., L’Hostaria sued Cincinnati Insurance in December in Pitkin County District Court; Cincinnati Insurance was able to transfer the suit to U.S. District Court in Denver in January.
Through the Denver firm Levin Sitcoff PC, the Italian restaurant’s suit cited county and state health orders hampering the restaurant’s operations in the spring of 2020. Potential guest to Aspen also were spooked by Pitkin County’s affidavit program for overnight visitors, the suit alleged.
Those orders should have triggered the restaurant’s civil authority coverage, they argued.
“L’Hostaria ceased its business operations on March 16, 2020, pursuant to the applicable Executive and Public Health Orders,” the suit said. “Although L’Hostaria reopened on April 27, 2020, it resumed with only limited curbside pickup and dining, in accordance with the applicable Executive and Public Health Orders. … L’Hostaria incurred, and continues to incur, business interruption losses of approximately $40,000 per month as a result of the suspension of its operations caused by direct loss to property at its premises due to the presence of COVID-19.”
Like other insurance carriers in similar positions, Cincinnati Insurance denied L’Hostaria’s claim for coverage of the losses because the restaurant’s general insurance policy excluded viruses as a payable claim, which meant that its civil authority coverage also did not apply.
Levin Sitcoff argued the potential for COVID-19 exposure at L’Hostaria qualified as physical property damage. In a similar suit filed on behalf of Monarch Casino & Resort Inc., a Nevada company that owns and runs casinos in Reno and Black Hawk, Colorado, Levin Sitcoff asked a federal court judge to allow the Colorado Supreme Court to answer the question: “Does the presence of COVID-19 at an insured location constitute physical loss or damage for purposes of a property insurance policy?”
The intent of getting that question answered, Levin Sitcoff attorneys argued to U.S. District Judge Regina M. Rodriguez, was to establish state law. Yet Rodriguez ruled in favor of defendant Affiliate FM Insurance Co. on partial summary judgment, rendering the issue moot, the judge noted in a Sept. 17 ruling.
Levin Sitcoff did not respond to a request seeking comment about the rulings.
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