Hotels and restaurants can’t revive a combination of $ 40 million antivirus coverage

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Law360 (May 24, 2021, 7:38 p.m. EDT) – A New Jersey federal judge has refused to reverse her dismissal of complaints filed by hotel and restaurant franchise owners, including Wendy’s, TGI Friday’s and Marriott, seeking $ 40 million in insurance coverage. of losses resulting from the COVID-19 pandemic, saying it had not exceeded its limits in its previous decision.

In dismissing the motion to quash her March 17 decision, U.S. District Judge Susan D. Wigenton said on Friday that she had not undertaken an improper investigation, instead limiting the scope of her decision to an assessment of pleadings, granting US warranty and liability. Insurance Co. motion to dismiss claims of Manhattan Partners LLC and others.

“ In determining that the complainants’ allegations did not present the facts which would trigger coverage under the relevant commercial insurance policy, this tribunal did not conduct an improper investigation, but rather limited its analysis to a review. of the adequacy of the plaintiffs’ pleadings and found them eager, ”Judge Wigenton wrote in an opinion letter.

In the contested decision, Judge Wigenton ruled that the pandemic and government shutdown orders did not trigger coverage because franchise owners had not sufficiently demonstrated that there was physical loss or damage to their properties.

The franchise owners, who also operate the Hilton and Zinburger Wine & Burger Bar establishments, said in their April 14 motion to quash the dismissal decision that Judge Wigenton’s findings were based on “findings of fact not supported ”.

They said the court “apparently concluded” that at the dismissal petition, plaintiffs must go beyond simply pleading the existence of physical loss or damage. This requirement was not present in the policy at issue, according to the franchise owners.

“Furthermore, it is evident that as we continue to learn more about COVID-19, the conclusions as to the virus’s inability to cause the type of physical loss or damage necessary to trigger coverage, are in the background. better premature, ”argued the franchise owners. in their motion for release.

“Rather than, in law, accept all well-argued facts as true and draw all possible inferences in favor of the plaintiffs for the purpose of analyzing the pleadings against a motion to dismiss … the district court approved the conclusion that the mere presence of the virus on surfaces cannot ipso facto cause loss or physical damage, as “provided” by policy, “indicates the motion to cancel.

Franchise owners pointed to pre-pandemic New Jersey case law that coverage for physical loss or damage could be triggered without the existence of permanent physical damage. They also said the court was “tricked” into believing that a provision of the policy that removed the virus from a contamination coverage exclusion, known in court filings as “the approval of the Louisiana “, was limited to that state.

In a May 3 response to motion to overturn, the insurer said the franchise owners’ claim that the court had erred was “absurd” and that any disagreement over the decision should be resolved at the appeal level.

The insurer said its position was supported by federal case law in the Third Circuit.

“ The Third Circuit held that, under New Jersey law, the mere presence of a potentially toxic substance or the general threat of future harm from its presence does not amount to “ direct physical loss or harm. ” property as required by the wording of the insurance. a property insurance policy, ”the insurer said.

The insurer also claimed that the Louisiana rider was only applicable in that state and that the franchise owners did not allege the Louisiana properties in their insurance claims.

Franchise owners operate 120 locations across the United States, according to their October complaint. The pandemic led to “significant loss of income, among other losses” after sweeping the country in March 2020, according to the complaint.

The insurer dismissed its loss claim on or about June 9, depending on the complaint. The owners of the franchise provided the insurer with a partial sworn statement of proof of loss later that month and then completed proof of loss the following month, according to the complaint.

However, the insurer “did not conduct a thorough investigation of the claim to determine whether coverage was available under the policy, despite the obligation to do so,” said the owners of the franchise. The insurer also never requested any information or considered additional information provided by franchise owners, according to the complaint.

“We believe his decision was wrong and we are preparing an appeal,” lawyer for franchise owners Dennis T. D’Antonio of Weg & Myers PC told Law360 on Monday.

Representatives for the insurer did not immediately respond to a request for comment on Monday.

The franchise companies are represented by Joshua L. Mallin and Dennis T. D’Antonio of Weg & Myers PC and Philip Rosenbach of Berman Rosenbach LLC.

American Guarantee is represented by Susan M. Kennedy and Michael Menapace of Wiggin & Dana LLP.

The case is Manhattan Partners LLC et al. v. American Guarantee and Liability Insurance Co., Case Number 2: 20-cv-14342, in United States District Court for the District of New Jersey.

– Additional reporting by Daphne Zhang. Edited by Kelly Duncan.

Update: This article has been updated to include a comment from lawyer Dennis T. D’Antonio, representing franchise owners.

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