Judge Dismisses Restaurant Chain’s Suit Over Denial of Coronavirus Coverage

Saddle Ranch Chop House

A Los Angeles judge Monday dismissed a lawsuit filed by a steakhouse chain that sued three insurance companies for allegedly breaching a contract to pay for losses incurred while its four eateries were forced to close due to the coronavirus pandemic, saying the policy required proof of physical loss to the locations.

Saddle Ranch Chop House brought the complaint Sept. 24 in Los Angeles Superior Court against Fireman’s Fund Insurance Co., Allianz Global Corporate & Specialty and Allianz Global Risks US Insurance Co.

Statewide health orders were issued in mid-March limiting restaurant service and closing bars the plaintiff’s locations in West Hollywood, Valencia and Orange as well as one in Glendale, Arizona.

But Superior Court Judge Steven J. Kleifield said he agreed with lawyers for the insurers that the claims were not covered by the policy. He said he did not believe the lawsuit could be amended to salvage the claims for breach of contract and breach of the covenant of good faith and fair dealing.

The plaintiff’s eateries have suffered hundreds of thousands of dollars in lost business income because of the COVID-19 outbreak, according to the suit. The insurers denied the claims on the grounds that the pandemic does not constitute “physical loss or damage,” despite the fact that their own policy identifies as an example of physical loss or damage the costs to “contain, treat, clean, detoxify and disinfect” the effects of viruses like COVID-19, according to the plaintiff.

Attorney Levi W. Heath, on behalf of the insurance companies, argued that more than 30 courts in California had agreed there must by a physical loss or damage to the insured’s property and that it was not enough that there was a decrease in business.

Plaintiff’s attorney Nathaniel S.G. Braun, responding to the judge’s inquiry whether there had to be a “disease event” at the restaurants for the policy’s communicable disease coverage to apply, said UCI Medical Center is less than 1,000 feet from the Orange restaurant and that numerous coronavirus patients have been treated there.

However, Heath said that communicable disease coverage only applies if a health authority directed a restaurant to take specific action, such as in the event of a listeria, botulism or salmonella outbreak.

The restaurant chain has paid thousands of dollars in premiums for coverage from the insurance companies, including a coverage extension for losses resulting from an outbreak of communicable disease, including viruses, according to the plaintiff’s court papers, which say Saddle Ranch “purchased this insurance to protect against the very sort of risk that occurred here.”

The plaintiff made a claim for its losses on April 2, but the insurance companies responded with a “snap denial” without a meaningful investigation, according to the suit.

Saddle Ranch restaurants have been featured in such television programs as “Sex and the City” and “The Bachelor” and in the reality television program, “Saddle Ranch” on the VH1 network.

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