The Massachusetts Supreme Judicial Court unanimously ruled that the restaurants could not recover for lost revenue after the pandemic began in early 2020 under Strathmore Insurance Co. property insurance policies because the losses did not result from a "direct physical loss of or damage to property" as defined by the policies.
Coppa, Toro, and Little Donkey restaurants in Boston and Cambridge, like other businesses, saw revenue declines after the state began imposing "stay-at-home" orders and restricting in-person dining to combat the spread of the coronavirus.
While they were allowed to continue offering takeout and delivery and eventually resume in-person dining, they argued in a lawsuit filed in 2020 that they should be entitled to compensation for their losses because the virus rendered their properties unsafe and unusable.
However, in a 6-0 decision, Justice Scott Kafker wrote that the policies required a distinct physical alteration of the property that rendered it unusable or damaged and in need of repair, which the virus did not do, citing rulings by nine federal appeals courts in similar cases.
"There were no physical effects on the property itself, as demonstrated by the restaurants' continued ability to provide takeout and other services," Kafker wrote. "Only these effects would trigger coverage under either the property or business interruption forms."
Benjamin Zimmermann, a lawyer at Sugarman and Sugarman for the restaurant owners, and Steve Goldman, an attorney at Robinson & Cole for Strathmore, did not respond to requests for comment.
The decision followed a string of similar decisions by courts across the country rejecting efforts by businesses to compel insurers to cover losses incurred as a result of lockdowns and other restrictions imposed by the pandemic.
In April 2020, the American Property Casualty Insurance Association, which filed a brief in the case, estimated that small businesses would incur $255 billion to $431 billion in monthly COVID-19 losses.
The majority of the decisions came from federal courts interpreting state insurance laws, and the Massachusetts restaurants urged the justices to "lead the way" among state appeals courts and rule in their favor.
Iowa, Ohio, Vermont, and Wisconsin state supreme courts have heard arguments in similar cases but have yet to rule.