Another Restaurant Files Suit to Force Coverage for Virus Shutdown

Two California restaurants has filed a lawsuit against a unit of The Hartford, seeking a declaration that the owner’s commercial insurance policy covers losses caused by a statewide business shutdown ordered to prevent the spread of coronavirus.

The lawsuit filed Wednesday by the owner of the French Laundry and the Bouchon Bistro in the Napa Valley community of Yountville follows a similar suit by the Oceana Grill in New Orleans against a Lloyd’s of London insurer. Both actions challenge a notion championed in blog posts by insurance defense attorneys that business interruptions in reaction to the coronavirus are not covered losses for most business insurance policies.

As it happens, the same attorney who filed the Oceana Grill lawsuit — John Houghtaling II of Metairie, Louisiana — is assisting with the California lawsuit.

“To avoid payments for a civil authority shut down the insurance industry is pushing out deceptive propaganda that the virus does not cause a dangerous condition to property,” Houghtaling said in a press release. “This is a lie, it’s untrue factually and legally.”

French Laundry and Bouchon Bistro are both owned by Thomas Keller, whom Houghtaling said is the only chef to have been awarded simultaneous three-star ratings by Michelin guides for two different restaurants.

Keller’s lawsuit says his policy with The Hartford Fire Insurance Co. does not have an exclusion for a viral pandemic. In fact, a “Property Choice Deluxe Form” in the policy extends coverage for a loss or damage due to virus. The suit says Keller’s KRM Inc. had to furlough 300 employees after shutting down the restaurants because of an order issued by the Napa County public health officer on March 18 allows take-out and delivery only.

The suit asks the Napa County Superior Court to declare that the order constitutes a prohibition of access to the restaurants and that it triggers coverage under the insurance policy.

Houghtaling said in a press release that restaurants across the United States are struggling because of the coronavirus.

“This entire sector is crippled by a nationwide public health shutdown impacting countless livelihoods,” he said. “We need insurance companies to do the right thing and save millions of jobs.”

Houghtaling said his first lawsuit in Louisiana was triggered in part by a March 12 article written by Shannon O’Malley, a partner with Zelle law firm in Dallas. She wrote that insurance policies that cover business-interruption expenses generally require a physical loss to trigger coverage, and that physical loss can’t be based merely on a supposition that coronavirus might be present.

She said even coverage that applies specifically to orders by civil authorities is contingent on actual physical property damage, not just the fear of contagion. O’Malley said: “unless the insured can prove that an order of civil authority was directly due to property damage at or near the insured’s location, the policy’s civil authority provision should not apply.”

About the photo: The French Laundry restaurant in Yountville, Calif. Photo courtesy of Thomas Keller Group.