Legal Sea Foods’ appeal in the lawsuit against Strathmore Insurance over COVID-19 pandemic losses should be denied, Strathmore said in a brief filed in federal appeals court in the U.S. state of Massachusetts.
Last May, Boston, Massachusetts-based Legal Sea Foods sued the insurance company over failure to cover business losses the seafood restaurant chain incurred from the COVID-19 pandemic.
A U.S. District Court judge ruled against Legal this March, and the company filed an appeal shortly thereafter.
The judge determined that Massachusetts law provides clear guidance on the interpretation and application of provisions of the insurance contract, and “its thorough decision is in accord with all other courts that have decided similar cases,” Strathmore said in its filing.
Legal’s allegations that government public health orders relating to COVID-19 impaired its use of its restaurants did not plausibly establish the “direct physical loss of or damage to property” requirement of the policy’s business income or extra expense coverages, according to Strathmore.
However, in September 2020, Legal changed course and claimed that it “became aware of” new evidence indicating that “COVID was present on its insured property beginning in March 2020.”
Legal’s second amended complaint (SAC) alleged that there were known cases of COVID-19 infections at certain restaurants, and that coronavirus attached to surfaces and was “hanging in the air” at those locations, Strathmore wrote.
“On that basis, Legal speculated that coronavirus must have been present in all of its restaurants, though it did not specify when,” the insurer wrote.
The complaint doesn’t include facts suggesting that the alleged presence of coronavirus in any restaurant caused any slowdown or cessation of Legal’s business activities, such as a suspension of operations, Strathmore said.
“Instead, Legal alleges that government orders caused the suspension of Legal Sea Foods’ operations by mandating the closure of Legal’s restaurant locations and prohibiting access to its restaurants,” Strathmore said.
The mere existence of COVID-19 does not cause “direct physical loss of or damage to property,” according to Strathmore.
