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The owner of a property leased to Red Lobster has filed a lawsuit against a Zurich Insurance unit, claiming the insurer negligently failed to name the owner on settlement checks issued to Red Lobster following a fire. The oversight allegedly allowed the restaurant chain to avoid using the $1.2 million payout for necessary property repairs.

Red Lobster Sues Zurich : Background of the Dispute

RL New Brunswick Owner LLC, the property owner, filed the complaint in New Jersey state court in August, and it was removed to federal court on Thursday. The owner asserts that Zurich American Insurance Co., which provided the insurance policy for the Red Lobster location in East Brunswick, New Jersey, breached its contract and acted negligently by not including RL New Brunswick as a loss payee on the settlement checks.

Fire and Insurance Settlement

The dispute stems from an August 2022 fire that caused extensive damage to the Red Lobster restaurant. Under the terms of its lease agreement, Red Lobster was required to maintain an insurance policy covering the property and to name the property owner as a loss payee. Zurich's policy, which ran from November 2021 to November 2022, provided up to $6.7 million in coverage.

After the fire, Zurich issued two checks totaling over $1.2 million to Red Lobster. However, RL New Brunswick claims that because it was not named on the checks, Red Lobster deposited the funds into its bank account and mixed them with its other assets.

Red Lobster Sues Zurich : Bankruptcy Complications

In May, Red Lobster filed for Chapter 11 bankruptcy protection, converting all its assets, including the insurance funds, into part of the bankrupt estate. As a result, RL New Brunswick argues that the $1.2 million intended for repairs is no longer accessible.

"Had Zurich abided by the terms of the policy, our client's interests would have been protected," said RL New Brunswick's attorney, Robert T. Trautmann. The property owner is seeking compensatory and consequential damages, claiming Zurich's actions violated the insurance agreement and caused financial harm.

Legal Representation and Next Steps

RL New Brunswick is represented by Robert T. Trautmann of Lerner Arnold & Winston LLP, while Zurich is represented by Philip C. Silverberg and Craig R. Rygiel of Mound Cotton Wollan & Greengrass LLP. Zurich declined to comment on the case.