(Reuters) – A trial court and a five-justice appellate panel got trapped in an “echo chamber of inapposite authority” and improperly acted as “amateur armchair epidemiologists” by rejecting the possibility that COVID-19 can cause property damage, attorneys for a multinational restaurant company argued Wednesday in their opening brief to New York’s highest court.

Consolidated Restaurant Organizations (CRO), which owns and operates dozens of Cantina Laredo, El Chico, Good Eats and other restaurants and catering services, hopes to revive its claims for business-income interruption coverage under a $50 million all-risk commercial property insurance policy from Swiss Re’s Westport Insurance Corp.

The trial court granted Westport’s motion to dismiss the case in 2021, and the Appellate Division affirmed that ruling last April.

Both those decisions are consistent with an unbroken streak of insurer wins in the federal courts of appeal, as well as nine of the 10 rulings so far by state supreme courts.

But New York’s top court, the Court of Appeals, should freeze that “snowball effect” in its tracks with a ruling based on New York precedent and the unique facts of this case, Robin Cohen of Cohen Ziffer Frenchman & McKenna argues in the appellant’s brief.

One critical distinction, according to Cohen, is that the plaintiffs in earlier cases often did not allege that the virus was physically present on their properties – possibly because the vast majority of policies (83%, according to the National Association of Insurance Commissioners) contains a virus exclusion.

However, CRO’s policy from Westport contained no such exclusion, and CRO’s complaint alleged in detail that the virus had physically damaged its restaurants by adhering to surfaces, turning them into “vectors for disease transmission” and rendering the dining areas “functionally useless.” That should be enough to state a claim under New York’s pleading standards, the brief says.

The Appellate Division disagreed, calling the complaint “conclusory.” Even if the virus did adhere to surfaces, it could easily be wiped away and therefore did not amount to “tangible” or “demonstrable” property damage, the panel held.

CRO says the appellate panel violated “core principles of insurance policy interpretation.” It argues that the court effectively rewrote the insurance policy, which requires “direct physical loss or damage” rather than “tangible” or “demonstrable” alteration.

Beyond its direct effect on CRO, the decision threatens to “severely restrict historically available insurance coverage for policyholders in New York … with respect to a wide range of noxious substances,” including pollutants and harmful fumes, the brief says.

CRO also argues that the Appellate Division erred by accepting, without evidence, the insurer’s claim that the virus can be removed with simple surface cleanings. Several reputable medical societies have disputed that premise and the science is “constantly evolving,” the brief says.

New York’s justice system “does not permit judges to resolve hotly disputed issues of scientific fact without an evidentiary record,” particularly “with respect to the impact and properties of a novel and evolving virus,” Cohen added in response to a request for comment.

Westport’s attorneys at DLA Piper had no immediate response. The insurer’s reply brief is due March 2.

The case is Consolidated Restaurant Operations Inc. v. Westport Insurance Corp, New York Court of Appeals, No. APL-2022-00160.

For CRO: Robin Cohen, Adam Ziffer and Orrie Levy of Cohen Ziffer Frenchman & McKenna

For Westport Insurance: Robert Santoro and Aidan McCormack of DLA Piper (US)

For amicus United Policyholders: Andrew Hahn of Covington & Burling

For amicus Chef’s Warehouse Inc: John Ellison of Reed Smith

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