Justices on Massachusetts‘ top court on Friday questioned why it should diverge from courts nationally that have found businesses are not entitled to insurance coverage for losses caused by COVID-19 as it heard an appeal by three restaurants.
In the first such case to reach a state’s supreme court, a lawyer for the restaurant owners told the Massachusetts Supreme Judicial Court that a judge was wrong to toss their challenge to Strathmore Insurance Co’s denial of coverage for their losses.
Benjamin Zimmermann, a lawyer for the Coppa, Toro and Little Donkey restaurants in Boston and Cambridge, argued they, like other businesses, bought all-risk policies like Strathmore’s to protect against losses other policies would not cover.
Those policies provide coverage for when a property is rendered unsafe and unusable due to conditions stemming from events such as tornadoes and fires, but also from an undetectable deadly virus, said Zimmermann of Sugarman and Sugarman.
But Justice David Lowy noted hundreds of rulings nationally have largely sided with the insurance industry in cases by businesses forced by states to shut down or restrict operations after March 2020 to stop COVID-19’s spread.
“What’s the fundamental flaw in all of these other decisions?” he asked.
Zimmermann responded that the courts — largely federal ones interpreting state law — had failed to follow tenants of contract law by not interpreting any undefined or ambiguous policy terms in the favor of the businesses.
“If it’s coming through in waves, and it’s hurting and killing people, and it’s causing people to not to be able use their physical property, they’ve suffered a direct, physical loss over damaged property,” he said.
Justices Dalila Argaez Wendlandt and Scott Kafker questioned why that was the case. Kafker noted that even after Massachusetts Governor Charlie Baker, a Republican, in early 2020 temporarily banned on-premises dining, the restaurants kept serving food by pick up and delivery.
“If there’s something wrong with the property, how can they do takeout?” Kafker asked.
Steve Goldman, a lawyer for GNY Insurance Company’s Strathmore subsidiary at Robinson & Cole, said the fact that the properties remained in use showed they sustained no physical damage warranting coverage.
He compared the virus to the less-serious instance of a waitress spilling a pitcher of water, saying the mess like the virus could be addressed through cleaning, rendering no damage to the property itself.
“COVID’s obviously more serious than a pitcher of water, but what it does to the property is the same,” Goldman said.
The case is Verveine Corp, et al, v. Strathmore Insurance Company, et al, Massachusetts Supreme Judicial Court, No. SJC-13172.
For Verveine Corp et al: Benjamin Zimmermann of Sugarman and Sugarman
For Strathmore: Steve Goldman of Robinson & Cole
For Commercial Insurance Agency: Andrew Ferguson of
Nate Raymond reports on the federal judiciary and litigation. He can be reached at email@example.com.