Davio's sues insurer for refusing to cover Covid-19 losses

Update: Appeals court dismisses suit.

The Davio's chain of Italian steakhouses says Covid-19 physically changed the air and surfaces in his restaurants in Massachusetts and other states and is suing the Strathmore Insurance Co. for refusing to cover claims related to Covid-19 losses at its Boston-area, Pennsylvania and New York outlets.

In a suit filed yesterday in Suffolk Superior Court, Davio's follows other businesses that the virus makes physical changes that no amount of scrubbing or disinfecting can eliminate and so losses due to Covid-19-related shutdowns, as well as the costs of disinfecting efforts, are covered under an "all risks" policy the chain purchase.

Once shed, the infectious particles remain in and travel through the air. They then settle on surfaces, adhering through gravitation and electrostatic forces. Theindoor air and surfaces are real and personal property in which Davio’s has an insured interest under the Policy and neither are excluded. ...

SARS-CoV-2 causes direct physical damage by physically and tangibly changing, altering and transforming the content of the i ndoor air and the composition of the surfaces throughout the buildings and structures at the restaurants—such that now these contain a concentration of SARS-CoV-2 infectious particles (whereas before they did not).

However, Davio's also claims that while Strathmore had a specific "virus exclusion" clause that it added to many of its restaurant policies, it never attempted to append that to Davio's policies, so "Davio’s reasonably expected that virus losses were covered under its Policy."

Davio's said it bought a more expensive "all risks" policy specifically to cover, well, all risks. It says owner Steve DiFillippo learned a valuable lesson in 1991, when the first Davio's, which he had only recently purchased, suffered a major fire: While his insurance covered his physical losses, he got nothing for losses caused by the interruption of his business.

Davio's said it filed its first claim on March 17, 2020, only a week after Gov. Baker declared a public-health emergency. It says Strathmore denied the claim on April 27 without ever having conducted any sort of investigation into Davio's claim, except for some phone calls to DeFilippo. Davio's alleges:

Not only was Strathmore’s investigation careless and superficial, but its conclusion was also wrong.

Davio's then "demanded Strathmore withdraw its baseless denial, adjust Davio’s claim, and advance payment for those amounts supported by the proper claims
adjustment" on Sept. 20, the lawsuit continues, adding Strathmore refused to do so. Strathmore cited government-ordered shutdown, which are excluded, as a reason, but Davio's retorts that the issue is not some order by the governore but "the physical loss of or damage to property" caused by the virus itself.

In 2020 and 2021, Davio's collected a total of $9.17 million in federal Payroll Protection Protection loans, which were converted into grants, for the restaurants covered in its suit.

Complete complaint (10.2M PDF).