By Diamond Naga Siu

Law360 (April 8, 2021, 10:10 PM EDT) -- The owner of Atlanta restaurants Joe's on Juniper and Hudson Grille asked a Georgia federal judge Thursday to reconsider his order denying COVID-19 coverage from Zurich American Insurance Co., arguing the judge transformed "findings of fact into conclusions of law to kill the case."

Restaurant Group Management LLC, which owns the popular midtown Atlanta restaurants, is one of many Georgia policyholders that lost while suing its insurer for COVID-19 coverage as courts continue to find that the virus itself and related government shutdowns don't add up to a physical loss or damage as required by the policies.

RMG argued in its motion for reconsideration of U.S. District Judge Thomas W. Thrash's March order that its allegations are filled with details of physical loss or damage due to the virus and said this case is a "simple" breach of contract claim. The judge "basically" decided that it was fine for Zurich to decline coverage because a virus can't cause direct physical loss or damage without considering the evidence that it might have, RMG argued.

"The court's order is an unwarranted expansion of the dismissal standard, and beyond that, imposes the draconian remedy of dismissing with prejudice, instead of dismissing without prejudice pending a Georgia appellate decision either supporting the northern district's AFLAC hypothesis or contradicting it," the restaurant owners said, citing a 2003 case called AFLAC v. Chubb Insurance Co., in which the court considered the "loss or damage" issue in Y2K-related claims.

RMG sued Zurich in November in a Georgia county court, but it was removed later in the month to a Georgia federal court.

RMG said in the complaint that its restaurants had no control over the closures mandated by the Georgia state government starting in early March and that the shutdowns caused some of the eateries to close permanently.

Counsel for RMG, Bob Persons of Lindsey & Lacy PC, previously told Law360 in November that while a virus is microscopic, it has a physical presence. Plus, he added, COVID-19 safety precautions meant the virus caused a physical change to the eateries.

Persons said at the time that restaurants were in a particularly tight situation, because, unlike people shopping in a grocery store, restaurant and bar customers cannot wear masks while eating or drinking.

But Zurich argued in a December motion to dismiss that RMG failed to state a claim with its argument, because the presence of a virus does not create direct physical loss or damage.

Judge Thrash found in favor of Zurich's arguments in March and added that the eateries themselves — not a virus — chose to rearrange their tables and seats to stymie virus transmission, so he ruled that the RMG did not meet the requirements to get paid by its insurer.

The direct physical loss or damage issue downed similar Georgia insurance suits by a daycare center, dental practice and law firm within the past year.

Counsel for both parties did not respond to requests for comment at time of publication Thursday.

The restaurant management company is represented by J. Robert Persons and William Thomas Lacy Jr. of Lindsey & Lacy PC.

Zurich is represented by Anthony Wyatt Morris and Robin Needham Johnson of Akerman LLP.

The case is Restaurant Group Management LLC et al v. Zurich American Insurance Company, case number 1:20-cv-04782, in the U.S. District for the Northern District of Georgia.

--Additional reporting by Daphne Zhang, Jeff Sistrunk and Shawn Rice. Editing by Emily Kokoll.

For a reprint of this article, please contact reprints@law360.com.