A Los Angeles restaurant faced a legal setback in a lawsuit against its insurance company this week, setting precedent for what could be a tough round of claim denials for restaurants negatively affected by the ongoing coronavirus pandemic.
Per Law360, Downtown LA restaurant Engine Co. No. 28 sued insurer Travelers Indemnity Co. out of Connecticut (as well as mayor Eric Garcetti) back in April, all in an attempt to recoup some losses stemming from the mandatory shut down of on-site dining and other non-essential activities back in March. Restaurant ownership claimed in the suit that revenue losses from the mandatory dining room closures amounted to a physical loss in the value of the company and the property itself. The suit also hints that Garcetti’s executive order mandating the closure of all non-essential businesses in March may be illegal.
However, Judge André Birotte Jr. rejected those claims, says Law360, noting that while the restaurant could “plausibly allege” a loss of the use of the property for its intended purpose (to let people sit down and eat), the pandemic and lockdown orders did not physically alter the space in any way. What’s more, because employees were still able to access the building as needed, even if customers weren’t, structurally the business remained the same even after the pandemic shutdowns began — even if there was little-to-no money coming in.
In the end, Engine Co. No. 28 seems to not have much of a legal leg to stand on, at least not in local court. The case dismissal amounts to yet another loss for restaurants desperate to recoup millions in lost revenue during the ongoing pandemic, as local politicians clamped down on business operations as a way of halting the spread of the coronavirus while simultaneously offering little in the way of economic support. In his international food newsletter Family Meal, writer Andrew Genung says of the case: “If any of you were still holding out hope for help from business interruption insurance coverage, I’m sorry to say it looks like case law continues to build against that possibility.”
And yet, multiple national lawsuits between restaurants and their insurers persist, meaning that even with this current setback a larger insurance reckoning is still likely coming across the country. Locally, chef Phillip Frankland Lee has sought interruption insurance coverage for the pandemic losses at his multiple Encino-area restaurants, while In-N-Out has sued its own insurer for a quarter-billion dollars, stemming from its own claim denial.