As discussed in two previous posts, the filing of lawsuits against insurance companies concerning coronavirus business interruption claims continues to escalate. Government activity on this front continues to brew as well.
New Business Interruption Suits Filed
C.A. Spalding, Inc., a Pennsylvania metal fabricator for the U.S. military was forced to close as a result of Covid-19 when it was deemed a “nonessential” business by the State government. The company has sued its insurer, Selective Insurance Group, Inc., for business interruption coverage after Selective denied the claim. Selective is arguing that direct physical loss and damage did not occur at C.A. Spalding locations.
IT! Italy Ristorante Café & Bar in Fort Lauderdale has sued Chubb for breach of contract for Chubb’s refusal to pay on an all-risk policy for losses sustained during the Covid-19 economic shutdown. The suit alleges that the “all-risk” policy should cover all losses including rent, mortgage, utilities, payroll, etc. The restaurant was forced to close its doors in response to the Florida government executive order.
Marc Fisher Footwear, LLC and 22 related companies sued Hartford Fire Insurance Company for losses suffered from coronavirus business interruption. Their claim includes lost income, payroll expenses, etc., under a multipronged business insurance policy offering $40.6 million in benefits.
HTR Restaurants, Inc. in Pennsylvania has sued Erie Insurance Exchange as part of a class action lawsuit stemming from Erie’s refusing to deny and/or refusing to acknowledge its business interruption claim stemming from a state-imposed closure of nonessential businesses.
A class-action suit has been filed in London concerning the failure of the insurer, Hiscox, to pay business interruption claims. Over 200 businesses have joined the suit so far and include a climbing center, media company, bakery, several restaurants, among many others.
Multi District Litigation
Several businesses, including Newchops Restaurant, Comcast LLC, and Dining, LLC, have joined in a motion to institute Multidistrict Litigation against insurance companies concerning the availability of business interruption insurance coverage, in an effort to promote a uniform answer to the lawsuits being filed.
Aggressive Insurance Company Tactics
The Travelers Casualty Insurance Company of America has filed a countersuit to the Geragos & Geragos law firm for filing a suit seeking business interruption coverage. Mark Geragos responded, stating “Travelers Insurance, after cashing our premium checks for years, decided yesterday that instead of paying our business interruption claim that they would hire a large law firm to sue us in federal court instead. Apparently, their way of adapting to a pandemic is filing lawsuits against their own insured.”
The Civil Justice Association of California, an organization seeking legal reform and a cessation of “frivolous” lawsuits, along with a coalition of industries deemed essential during the coronavirus pandemic, are urging Governor Gavin Newsom to broaden protection for private entities from potential liability resulting from the crisis, in order to prevent further damage to the state economy.
A proposed federal reinsurance program for pandemic risks is currently under consideration by lawmakers on Capitol Hill, in an effort to promote insurance carriers to offer coverage for business losses due to future viral outbreaks. The proposal for a future Pandemic Risk Insurance Act calls for voluntary participation, with participating insurers assuming the risk of the first $250 million of business interruption losses incurred by policyholders. After reaching that threshold, a federal fund administered by the United States Treasury would cover 95% of all additional losses up to $500 billion in a single year, with the remaining 5% to be paid by the participating insurers. This proposal is similar to the Terrorism Risk Insurance Act, which created a similar plan following the 9/11 attacks. Unfortunately, pricing policies may prove difficult due toa lack of historical data by which to perform actuarial risk assessments.
As the number and complexity of these disputes continue to rise, the experienced team at Schwartz, Conroy & Hack, PC remain on the cutting edge of coronavirus-related insurance recovery matters. Contact us today for a free consultation.
Evan S. Schwartz
Founder of Schwartz, Conroy & Hack