Are New Jersey Insurers on the Hook for Restaurants’ COVID-19 Losses?

Are New Jersey Insurers on the Hook for Restaurants’ COVID-19 Losses?


During the pandemic, many businesses felt the impact of government regulations.  With regulations like curfews, mask mandates, and changing capacity limits, businesses have experienced upheaval throughout the pandemic.  Legal ramifications for such situations are still evolving.  In New Jersey, one restaurant argued that business revenue lost due to a takeout/delivery-only requirement was covered by its insurance policy.


Grand Cru and the Virus Exclusion Clause

In Grand Cru, LLC, v. Liberty Mutual Insurance Co., et al., Grand Cru had an insurance policy that included coverage for “[b]usiness [i]ncome, [e]xtra [e]xpense, and [c]ivil [a]uthority.’”’”  This would “exclude…losses caused by, resulting from, or relating to viruses.”

When the governor of New Jersey introduced an order limiting restaurants to takeout and delivery, customers were not permitted to dine in at Grand Cru’s restaurant.  According to Grand Cru, this was not due to the coronavirus but rather the governor’s order preventing people from dining in restaurants.  The court did not find this argument persuasive, referring to the mentions of the COVID-19 spread in the executive order.


What Was Lost?

Even if Grand Cru had convinced the judge the governor’s order was the reason customers could not dine in, there was another hurdle.  Grand Cru had to demonstrate a physical loss in order to recover under the insurance policy in effect.  In addition to arguing the virus exclusion clause did not apply, Grand Cru also argued they had suffered a “‘direct physical loss’” from being unable to use their premises.  The judge disagreed.  In fact, the judge opined, “‘[p]laintiffs point to no direct physical loss or damage to the covered property.’”


COVID-19 Upswing

With new COVID-19 variants on the rise, it is unclear what the future holds for public dining.  For now, restaurants must comply with the following policies, per New Jersey’s COVID-19 Hub:

  • 1. Social distancing and masking is not required in most indoor or outdoor spaces, and there are no capacity limits for businesses or worksites open to the public.
  • 2. However, to save lives and stop the spread of COVID-19, businesses should encourage individuals to wear a mask indoors and have the right to require stricter mask policies.[ii]

The policies could change at any time.  Vaccine mandates for restaurant entry have been implemented in some larger cities.[iii]  In Los Angeles, Mayor Garcetti signed an ordinance that requires proof of COVID-19 vaccination to enter indoor restaurants, among other places.[iv]  New York City has a similar policy in place.[v]


Insurance Companies, Be Aware

This is not the first, nor will it be the last, piece of litigation over COVID-19 losses in a restaurant.  COVID-19 regulations have hit all businesses hard, but restaurants have especially suffered losses because of the unique business model.  While the appellate court ruled against any expense to the insurer here, insurance companies should be aware that COVID-19 litigation will continue for months as insureds attempt to determine what losses they can and cannot recoup.  As regulations for restaurants and dining out continue to change, the law will be in flux as well.




[i] Grand Cru, LLC v. Liberty Mut. Ins. Co., Civ. No. 20-6878, 2 (D.N.J. Nov. 25, 2020), citing 1st Am. Compl. ¶ 4, ECF No. 1-2.

[ii] New Jersey COVID-19 Information Hub, What are the reopening rules for bars and restaurants? Are there safety recommendations?, New Jersey COVID-19 Information Hub (Sep. 21, 2021), available at:

[iii] National Restaurant Association, Vaccination mandates: How to handle asking for proof, National Restaurant Association (Aug. 10, 2021), available at:

[iv] Emily Alpert Reyes, L.A. to require proof of COVID vaccination at indoor restaurants, salons, other venues, LA Times (Oct. 6, 2021), available at:

[v] Talal Ansari, NYC to Require Vaccination for Many Indoor Activities Such as Restaurants and Gyms, Wall Street Journal (Aug. 3, 2021), available at:






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