By Joyce Hanson

Law360 (March 5, 2021, 6:11 PM EST) -- A Tennessee federal judge has rejected famed nightclub and restaurant Nashville Underground's bid for insurance coverage of losses due to the COVID-19 pandemic, ruling that it can't claim "food contamination" from the virus because the venue hasn't pointed to any foodborne illness outbreaks.

U.S. District Judge Eli Richardson's Thursday order found that Nashville Underground LLC's suit against Amco Insurance Co. doesn't show the club suspected that food contamination was actually caused by the virus and transmitted by the club's "limited service" restaurant employees. The language in Amco's policy states that coverage is triggered by food contamination that is suspected to have already happened, and not by a suspicion that such contamination might happen, the judge said.

"At the very most the amended complaint alleges that government officials suspected that this kind of outbreak could occur at limited-services restaurants," Judge Richardson wrote. "But in the court's view, the policy is unambiguous: 'food contamination,' including the particular type plaintiff claims was the object of suspicion, refers only to something that already has occurred."

The policy's "food contamination endorsement" might conceivably provide coverage for the club's losses because the chief medical director of the Nashville-Davidson County Board of Health actually ordered in March 2020 a minimum three-day closure due to the virus of all restaurants and bars that sold more alcohol than food, meaning "limited-service restaurants" such as Underground Nashville, according to Judge Richardson.

But, the judge said, the language of the endorsement provides coverage only if the club's business has been ordered to close as a result of the discovery or suspicion of food contamination.

"If one assumes that concerns about the possibility of present or future food-related illness caused by coronavirus contamination qualify as 'suspicion' of food contamination, plaintiff still needs to plausibly allege that any orders to close resulted from such concerns. And plaintiff has not done so," the judge wrote.

Nashville Underground is a seven-story restaurant, bar, night club and live music venue located on Broadway, a popular tourist destination in the city's downtown area, according to Judge Richardson. The club generates "significant revenue" from private events, performances, DJ events, and food and alcohol sales, he said.

When the chief medical director issued his closure order on March 17, 2020, Nashville was forced to fully shutter and lost all of its business income, Judge Richardson said. Then on March 22, Tennessee Gov. Bill Lee issued an executive order that closed all restaurants and bars, except for eateries that served menu items via drive-thru, curbside pickup or delivery. But Nashville Underground doesn't derive revenue from any of those three options, the judge said.

Nashville Underground saw what was ahead with the upcoming closure orders and on March 16 gave notice of its expected losses and damages by filing a claim with Amco, according to Judge Richardson. But Amco denied the claim March 23, saying any loss resulting from a virus, as well as any losses related to civil authority closures, were excluded, the judge said.

Amco's adjuster denied the club's initial claim partly because no evidence or report of food contamination was provided, Judge Richardson noted.

The nightspot then filed a breach of contract suit in April in Davidson County Circuit Court, amending the complaint in May. Amco removed the amended suit to federal court May 20 and filed a motion to dismiss the case less than a month later.

In a July 13 brief lodged with the court, Nashville Underground clarified that it was seeking coverage under only the food contamination provision of the policy.

"Restaurants and bars were closed, in part, because the Board of Health and chief medical director were attempting to limit the spread of coronavirus through contamination of food, the conveyance of food, contamination of employees and the contamination of the interior, structure, furnishings, fixtures and equipment of the restaurant and bars," the brief said. "Plaintiff has sufficiently pled that the closure of its establishment was due to food contamination."

Representatives for Nashville Underground and Amco did not immediately respond Friday to requests for comment.

Nashville Underground is represented by Kirk L. Clements of Clements Law Firm PLLC.

Amco is represented by Russell E. Reviere and Jonathan D. Stewart of Rainey Kizer Reviere & Bell PLC.

The case is Nashville Underground LLC v. Amco Insurance Co., case number 3:20-cv-00426, in the U.S. District Court for the Middle District of Tennessee.

--Editing by Breda Lund.

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