Joanna Fantozzi

A landmark business interruption claims case is going to trial after a Kansas City judge upheld his ruling on Tuesday that the Missouri-based restaurant/brewery group K.C. Hopps sustained “direct physical loss or physical damage during the pandemic.”

While there have been many similar lawsuits filed by businesses against insurance companies over the past year and a half, most of them have been dismissed. In fact, according to a case tracker created by the University of Pennsylvania Law School, less than 2% of the 600 tracked COVID-19-related business interruption cases have granted the insurance policyholder a motion summary judgment. More than 80% of these cases have been dismissed by courts.

U.S. District Court Judge Stephen Bough maintained that since K.C. Hopps provided evidence that a COVID-19 infection was present on its premises, there is enough evidence to go to trial.

 “Whether the virus was present on plaintiff’s premises, whether it actually caused a physical loss or physical damage to plaintiff’s premises, and the extent of plaintiff’s damages due to that ‘loss’ are genuine issues of material fact which preclude summary judgment,” Judge Bough said in his ruling.

Judge Bough did grant the defendant, Cincinnati Insurance, summary judgment on the issue of ingress/egress or the ability of a property owner to enter/leave their property.

Related:San Francisco-based chef Daniel Patterson joins growing number of restaurateurs suing their insurance companies for business interruption claims

“The majority of the courts have said, ‘No, you don't get to go past first base, because most of the policies that are an issue in these cases, have a requirement for physical loss or damage,’” Micah Skidmore, an insurance attorney with law firm Haynes Boone said.  “The frontline of this whole debate is when you have a business that is losing money because of the pandemic, is that considered physical loss?”

Skidmore said that for the most part, the only successful business interruption claims cases have focused on evidence of COVID-19 infection on their property, instead of the government-forced lockdowns.

“Courts have not found that the orders themselves qualify as physical loss cases,” Skidmore said. “By and large, those that have succeeded had been the ones that have said we have viral contamination on the premises. […] So, this case is consistent with the idea that if you have the virus present at your property, you have a better chance of establishing that you have [a case].”

When the case goes to trial, K.C. Hopps will have to provide evidence that sick people came into the restaurant, or sick employees worked in the restaurant, either through a witness who is willing to testify that they were sick or an expert (like an epidemiologist) who can certify that based on the number of COVID-19 cases in the area and the traffic to the restaurant that it is scientifically certain that the business employed or came in contact with guests who became ill from the virus.

“The insurers are banging on the table saying, ‘you can clean it; it’s not physical loss,’” Skidmore said.  […] But it’s not quite as simple as just wiping something down. […] If you clean the tables and chairs, then what about fabric surfaces like carpet and tablecloths? How do you know when you’ve eliminated the virus from the air? And once you do a deep clean, how are you going to ensure that there isn't somebody that comes in the next day and coughs and you have to do it all over again?”

The date of the K.C. Hops v. Cincinnati Insurance trial is unknown. Nation’s Restaurant News has reached out to legal representatives of both the plaintiff and defendant for a statement.

Contact Joanna at [email protected]

Find her on Twitter: @JoannaFantozzi