"The virus was introduced long before the governor ordered the restaurant to close, but the restaurant continued to be open in spite of that physical loss of damage. Why was there suspension afterwards, but not before?" Singal asked.

"[Under] your definition, isn't it true as soon as one person who is infected comes into your restaurant, it's now uninhabitable, right? … [It had] limited seating for a period of time and it was not closed, correct?" he later asked. "So why wasn't it uninhabitable then?"

Singal also questioned what the physical damage at the chain's restaurants was and how it was repaired.

"The policy only pays during the period of restoration. Are you saying that all of the furniture is going to be burned because it can't be restored? What is the restoration process the restaurant has had to effect from the day they closed?" he asked.

Levine responded that, early in the pandemic, the chain was unaware of how the virus spread but was making plans to close down just as the governor announced his orders. Addressing the damage involved installing air filtration systems, adding physical barriers for social distancing and deep disinfection, Levine said.

U.S. District Judge Nathaniel Gorton of the District of Massachusetts dismissed Legal Sea Food's claims in March, saying in a 16-page ruling that because a virus doesn't affect the structural integrity of a property, like a fire might, that it "cannot constitute 'direct physical loss of or damage to' property." Legal Sea Food's policy with Strathmore Insurance Co. didn't specifically exclude coverage for a pandemic, but Gorton concluded that didn't mean coverage was warranted.

While Barron also grilled Levine on when the restaurants became unusable, he directed probing questions to the opposing counsel as well. He posed a hypothetical scenario to the insurance company's attorney involving strong odors, and questioned whether there are instances where an insurer needs to provide coverage when a property has been deemed unusable but not physically destroyed.

"Just take a case involving odors … an odor that just renders the restaurant unusable. And let's say that the fact of the situation is such that attempts to counter the odor with disinfectant would itself be so powerful, it would be unpleasant to be there," Barron said to Gregory Varga, of Robinson & Cole. "And that essentially the only thing that's really going to resolve the problem is time until the odor fades. Is your position in that circumstance, if there's no recovery?"

Varga said, in that situation, a policyholder could potentially get coverage, but that Legal Seafoods' case is different. He argued that COVID-19 didn't render Legal Sea Foods' restaurants unusable because the chain continued operating during the pandemic while the virus was present.

"We have been in this pandemic. People have been using buildings, occupying buildings," Varga argued.

Barron also asked about the relationship between Legal Sea Food's appeal and a separate lawsuit brought in state court by three Boston restaurants against Strathmore Insurance Co. over the company's refusal to provide coverage for losses due to COVID-19. In that case, the restaurants allege the cause of losses was government shutdown orders, not the virus physically altering the air and surfaces, Levine told the judges.

Barron suggested the panel could certify the question with the Massachusetts Supreme Judicial Court.

Other federal appeals courts have ruled against policyholders, including the U.S. Courts of Appeals for the Sixth, Eighth, Ninth and Eleventh Circuits.

Varga cited the decision in Santo's Italian Cafe v. Acuity Insurance out of the Sixth Circuit last month. In that appeal, the three-judge panel ruled in favor or Acuity Insurance and found that the cause of a Medina, Ohio, Italian restaurant's suspension of operations "did not arise from a physical loss of property or damage to it."

"Insurance is not a safety net for all dangers and it doesn't cover everything," Varga said. "It's not a guarantee of a business' financial performance, but that's what Legal Seafoods views this policy as."