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In a metropolitan area with a red hot dining scene, making it 20 years is no easy accomplishment. That’s how long Rolando Juarez and his wife Karen Barroso have been providing Arlington residents and workers with their Tex Mex fix at Guajillo in Rosslyn.

The future of their long-tenured neighborhood gathering place is in jeopardy. Virginia’s governor mandated that restaurants close to on-premise consumption in late March to slow the spread of COVID-19. Guajillo has been offering take-out and delivery for a limited number of hours a day to keep all staff employed. Juarez says daily sales are down 60 to 80 percent, depending on the day. He works seven days a week without pay.

Guajillo needs help to have a fighting chance at reopening once it’s permitted to do so. Juarez tried applying for various grants and loans. “But they got eaten up by big corporations, so we haven’t received a penny,” he says. 

Juarez feels his restaurant wouldn’t be in such a desperate position if his insurance company, Twin City Fire Insurance Company Inc., hadn’t denied Guajillo claim over lost business. 

“It’s a legal contract and it’s their responsibility,” he says. “That’s why you get insurance in the first place. They didn’t expect this. Nobody expected this. I guess now, when they see the reality, they’re looking for legal ways to say, ‘No we can’t help you.’”

Guajillo filed a lawsuit in Arlington yesterday against Twin City, which is owned by The Hartford Insurance Group. Guajillo is asking the court to compel its insurance company to cover its businesses losses related to COVID-19. No specific amount has been determined yet because the public health emergency is ongoing. According to the complaint, Hartford had a net income of more than $2 billion in 2019. Hartford declined to comment on the lawsuit. 

“This is not a give-away they’re trying to get,” says Guajillo’s attorney Scott Rome. He co-founded and is the lead litigator at The Veritas Law Firm based in D.C. “This is something they paid for every year. These people buy these policies for this specific reason.”

A growing number of restaurants and restaurant groups are turning to the legal system to fight their insurers for coverage they believe they’re entitled to. This is Rome’s second such case in the D.C. area. He’s also representing Proper 21, which is suing a New York-based insurance company in D.C. Superior Court.

Most bars and restaurants, debilitated by outbreak because they’ve been mandated to close or meagerly operate, believe their claims should be covered under what’s known as business interruption insurance. Such insurance typically covers establishments when they have to shut down or reduce their operating capacities after suffering physical property loss or damage from disasters like fires or floods. But operators are hoping “global pandemic” will be considered a reason insurance should kick in, even if it’s not explicitly spelled out in policies. 

Guajillo’s policy reads, “We will pay for the actual loss of business income you sustain due to the necessary suspension of your operations during the period of restoration. The suspension must be caused by direct physical loss of or damage to the property at the premises.”

Chris LaFon, also an attorney at Veritas, says he has case law that proves physical loss can be interpreted in a way that supports Guajillo’s case. “What courts have held up is that if part of a property becomes unusable—that’s loss,” he says. 

The complaint cites a couple of examples, including the time U.S. Airways sued its insurance company after 9/11 because the federal government closed Reagan National Airport for nearly a month. When the airline filed a claim, the insurance company denied coverage, arguing that there was no physical damage to U.S. Airways’ property. The court rejected the argument, ruling that “[d]amage to the physical property of U.S. Airways is not a condition precedent to recovery for business interruption.”

To date, City Paper hasn’t heard of one local restaurant that has successfully filed a business interruption claim related to the pandemic. But Guajillo’s attornies have another argument to make.

Unlike most restaurant insurance policies, Guajillo’s policy specifically mentions the word “virus” in an add-on endorsement. It says, “We will pay for loss or damage by fungi wet rot, dry rot, bacteria, and virus.” Twin City also says in the policy that it will pay for the costs associated with the enforcement of any ordinance or law which requires others to test for, monitor, clean up, remove, contain, treat, detoxify or neutralize or in any way respond to, or assess the effects of fungi, wet or dry rot, bacteria, or virus.

Rome, LaFon, and Juarez are hoping the court favorably interprets the wording in Guajillo’s insurance policy. COVID-19 is a virus. The pressure’s on. A lot of restaurants will be looking to the first wave of cases against insurers to see if it’s worth investing the time and money to bring their own lawsuits. 

These legal battles are starting to gain national attention. Roll Call reported earlier this month that a group of insurance industry associations sent California lawmakers a letter explaining why they can’t cover pandemic-related losses. “Insurance coverage works by spreading risk, but that model simply cannot account for a situation in which losses are catastrophic and nearly universal. Standard business interruption policies do not, and were not designed to, provide coverage against communicable diseases such as COVID-19, and as such, were not actuarially priced to do so,” the groups wrote.

Early on in the crisis, legislators wrote a letter of their own. Eighteen democrats and republicans came together to say financial losses triggered by COVID-19 should be included in business interruption coverage. Some states, including Massachusetts, Ohio, and New Jersey are trying to push legislation through that would compel insurance companies to pay up.

While they wait and hope for the government to step in, restaurants are turning to local courts to sort out the high stakes scenario.