By Eli Flesch

Law360 (June 18, 2021, 3:58 PM EDT) -- A Miami restaurant is taking its pandemic coverage class claims to the Eleventh Circuit, saying a lower court incorrectly found that government restrictions and the potential presence of the virus at the property didn't cause physical loss or damage.

Town Kitchen said Thursday that a Florida federal court misapplied the state's rules concerning contract construction by failing to rule in the restaurant's favor over what it described as ambiguous language in policies it held with Certain Underwriters at Lloyd's of London, Indian Harbor Insurance Co. and HDI Global Specialty SE.

It slammed the court for prematurely dismissing its suit, saying it had adequately shown how the pandemic damaged the restaurant. Physical loss, it contended, was undefined in its policies, and it included the loss of use of its property as a result of shutdown orders.

"Town's necessary suspension of dine-in operations because of the viral pandemic qualifies as 'direct physical loss,'" the restaurant said. "Both the presence and imminent threat of a contagious and dangerous virus in, on and around the insured property such that it cannot be operated safely satisfies the physicality requirement," it added.

Town argued that it was not afforded the proper opportunity to produce evidence showing that the virus was so ubiquitous as to make the restaurant unsafe for human occupancy. It likened the presence of the virus to the incidence in a property of asbestos, noxious odors, or chemical fumes that could warrant coverage.

The restaurant also said it had properly alleged that it was entitled to civil authority coverage under its policies. The spread of the virus in Miami-Dade County damaged the properties surrounding Town, it said, spurring government orders that closed the restaurant.

U.S. District Judge Federico A. Moreno dismissed Town's coverage suit in March, finding that because the restaurant didn't suffer physical loss, it wasn't entitled to any business interruption coverage. He pointed to the rulings of many other courts across the country to support his finding that "all-risk" policies preclude pandemic coverage.

"Under their loss of use theory, Town Kitchen is attempting to shoehorn their losses stemming from the inability to use their restaurant at full capacity into something covered by their insurance policy merely because they are caused by a physical virus — but coronavirus particles damage lungs, they do not damage buildings," he said.

Rather than losing business over a physical loss, Judge Moreno said, Town's losses were closer to that which a restaurant might experience if its liquor license were suspended, or a University of Miami championship parade clogged up a major road.

With its appeal, Town becomes one of the latest eateries to take its coronavirus coverage suit to the Eleventh Circuit. Last month, a Florida steakhouse asked the court to revive its suit, and in April a chain of brunch restaurants sought the same.

Representatives for the parties in Town's suit did not immediately respond to requests for comment.

Town is represented by Jason S. Mazer of Cimo Mazer Mark, Kevin B. Love, Lindsey C. Grossman and Michael E. Criden of Criden & Love PA, and by Linda P. Nussbaum of Nussbaum Law Group PC.

The insurers are represented by Jason A. Pill, Sarah B. Van Schoyck and John D. Mullen of Phelps Dunbar LLP.

The case is Town Kitchen LLC v. Certain Underwriters at Lloyd's et al., case number 21-10992, in the U.S. Court of Appeals for the Eleventh Circuit.

--Additional reporting by Lauren Berg, Joyce Hanson and Daphne Zhang. Editing by Haylee Pearl.

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