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Law360 (April 12, 2021, 9:07 PM EDT) -- AmGuard Insurance Co. has urged the Ninth Circuit to reject a Los Angeles restaurant's proposed class action seeking COVID-19 related loss coverage, arguing that the eatery's alleged inability to operate its business inside the restaurant due to state closure orders does not satisfy the policy's property damage requirement.
In a Friday Brief, AmGuard said Plan Check failed to show its restaurant property experienced any tangible property change. The insurer said that the eatery's alleged loss of use of the property does not constitute a direct physical loss, a precondition for coverage, and that the policy's virus exclusion bars all losses relating to COVID-19.
"Like many restaurant owners, Appellant was impacted by virus-related limitations on on-premises dining. But Appellant did not allege any damage to its property in its complaint and does not assert any such damage in its Opening Brief," the carrier said.
In February, the American comfort food restaurant asked the Ninth Circuit to revive its proposed class action, arguing that federal courts around the country had wrongly tossed virus coverage suits for fear of burdening the insurance industry with payment obligations.
According to court records, the downtown location of Plan Check closed last March because of the pandemic. While Plan Check's West L.A. location has since reopened for takeout and delivery, the downtown location remains closed.
On Friday, AmGuard said that although the eatery claimed government orders limited how it used its restaurant space, it did not demonstrate how the orders physically altered its property or caused any distinct damages that needed repairs.
The restaurant's property and space remain physically unchanged, so there is no property damage, the insurer said.
AmGuard said in the brief that the lower court did not err in following "the overwhelming California authority" by holding that the policy unambiguously requires a tangible physical change to the property. More than 50 California federal district courts have tossed similar COVID-19 coverage disputes, the insurer said, urging the Ninth Circuit to uphold those decisions and dismiss this suit.
Additionally, the insurer said there is no question that Plan Check's insurance claim should be denied because the policy's virus exclusion specifically bars loss caused "directly or indirectly by ... any virus."
Plan Check initially sued AmGuard last June, seeking to force the insurer to cover its financial losses from state-mandated closures during the pandemic and hoping to represent all California restaurants that held a policy with AmGuard and experienced similar coverage denials. Last September, a California federal judge tossed the suit, agreeing with the insurer that the restaurant did not incur property damage
Federal district courts across the country "appear to have given in to certain analytical errors out of concern for imposing a heavy burden on the insurance industry," Plan Check argued in its appellate brief in February.
Counsel for the insurer could not be immediately reached for comment on Monday.
Plan Check is represented by Kathryn Lee Boyd of Hecht Partners LLP.
AmGuard is represented by Bryce L. Friedman of Simpson Thacher & Bartlett LLP.
The case is Plan Check Downtown III LLC v. AmGuard Insurance Company et al., case number 20-56020, in the U.S. Court of Appeals for the Ninth Circuit.
--Editing by Peter Rozovsky.
For a reprint of this article, please contact reprints@law360.com.
