Legal Sea Foods’ COVID losses lawsuit dismissed

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U.S. District Judge Nathaniel M. Gorton dismissed Legal Sea Foods LLC’s case against Strathmore Insurance Co. on Friday.

Last June, Boston-headquartered Legal Sea Foods filed a breach of contract suit against the insurer Strathmore Insurance Co which denied coverage to the 34-restaurant chain.

The lawsuit alleged that Strathmore Insurance Co, a unit of the Greater New York Group, rejected its damages claim twice for business losses after it had to close its restaurants down due to the coronavirus pandemic. The seafood chain claims that the “all risks” policy should cover losses.

The policy Strathmore, which was capped at USD 94.8 million and took effect March 1, did not contain a virus or pandemic exclusion. But Legal said it signed the policy on March 1, a week and a half before the World Health Organization officially declared the coronavirus a pandemic on the 11th of March.

Law 360 reports that U.S. District Judge Nathaniel M. Gorton has dismissed Legal Sea Foods case in Massachusetts.

He said that the policy covers lost business income and expenses incurred during a suspension of operations due to “direct physical loss of or damage to” properties, the restaurant chain failed to plausibly allege that COVID-19 was present at 32 properties and caused such loss or damage.

“Even if Legal had properly alleged that COVID-19 caused business interruption losses due to its presence at the designated properties, it would not be entitled to coverage under the policy,” Judge Gorton said.

“Courts in Massachusetts have had occasion to interpret the phrase ‘direct physical loss’ and have done so narrowly, concluding that it requires some kind of tangible, material loss,” he added.

The publication added that Legal Sea Foods joins many involved in the US hospitality industry who have sued their insurers to recoup losses related to the pandemic, only to find that courts have generally ruled that virus exclusion provisions preclude such losses.