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COVID-19 Litigation: What You Need to Know Now (Week of August 3)

The latest business interruption suits and class actions







From Crowell Moring, LLP


The owner and operator of a marketing company sued Certain Underwriters at Lloyd’s London in Florida state court (Hillsborough County) “to affirm that the Civil Authority constitutes a direct physical loss or damage to property,” that the “decreased use of the property because of Civil Authority is tantamount to direct physical loss or damage to property,” that “acts of Civil Authority are tantamount to a direct physical loss or damage to property,” and that “Civil Authority is a covered cause of loss under the Policy not subject to any exclusions.” Complaint at ¶¶ 32-35.


The operator of restaurant and retail sales businesses sued Fireman’s Fund Insurance Company, Associated Indemnity Corporation, and Allianz Global Risks United States Insurance Company in federal court (D. Mass.), asserting claims for breach of contract, breach of the covenant of good faith and fair dealing, and violations of G.L. c. 176D and G.L.c. 93A. The “all risk” policy at issue allegedly provides business income, extra expense, and civil authority coverage. Complaint at ¶ 9. The Complaint alleges that as a direct result of Massachusetts’ COVID-19 closure orders, the plaintiff “has incurred a physical loss of and damage to their insured properties for regular business operations.” Id. at ¶ 45. The insurer allegedly “failed to make a good faith investigation, determine coverage and adjust [the plaintiff’s] claim because defendants reached a pre-determined conclusion to deny coverage.” Id. at ¶ 71.


A sports equipment and apparel store franchisee sued Erie Indemnity Company in Ohio state court (Delaware County), asserting claims for declaratory relief, breach of contract, and bad faith. The “all risk” policy allegedly provides business interruption, extra expense, and civil authority coverage. Complaint at ¶¶ 26-33. The Complaint alleges that the plaintiff’s losses “are ‘direct’ in that they were directly caused by the Executive Orders; and they are ‘physical’ in that Plaintiff’s employees and customers have been unable to be physically present on the property, meaning that Plaintiff has been physically deprived of its property and business.” Id. at ¶ 45. The insurer allegedly denied the claim on the grounds that there was no physical loss or damage to property and various policy exclusions were applicable, and the insurer is alleged to have “failed to appreciate or investigate the basis for the Claim.” Id. at ¶¶ 83, 84.


A hair salon sued Continental Casualty Company in Florida state court (Broward County), asserting claims for declaratory relief, breach of contract, and bad faith claims adjusting in violation of Florida Statutes Section 624.155. The “all risk” policy allegedly provides business income, extra expense, and civil authority coverage. Complaint at ¶¶ 14, 15. The Complaint seeks a declaration that the COVID-19 closure orders has caused physical property loss and damage to insured property and that coverage is provided for future civil authority orders that result in suspensions or curtailments of business operations. Id. at ¶ 24. The insurer is alleged to have denied the plaintiff’s claim without conducting a reasonable investigation and to have failed to provide a reasonable written explanation of the basis for its lack of a reasonable settlement offer. Id. at ¶ 57.


The owner of retail department stores in Pennsylvania, New York, New Jersey, Delaware, Maryland, Ohio, Connecticut, and Rhode Island sued American Guarantee & Liability Insurance Company in federal court (E.D. Pa.), asserting claims for declaratory relief, breach of contract, and breach of the duty of good faith and fair dealing and bad faith. The “all risk” policy allegedly provides business income, civil or military authority, protection and preservation of property, and time element coverage, and excludes “contamination, and any cost due to contamination including the inability to use or occupy property or any cost of making property safe or suitable for use or occupancy. . .” Id. at ¶¶43, 45-46. “Contaminant” is defined as “any solid, liquid, gaseous, thermal or other irritant, including but not limited to smoke, vapor, soot, fumes, acids, alkalis, chemicals, waste (including materials to be recycled, reconditioned or reclaimed), other hazardous substances, Fungus or Spores.” Id. at ¶53. The complaint alleges that the defendant wrongfully denied the plaintiff’s claim for coverage under the policy without conducting any investigation. Id. at ¶¶73-79. The complaint further alleges that the defendant “like other insurers has been engaged in a pattern and practice of refusing to conduct individual analysis of claims on their merits,” and “is engaged in an ongoing, one-sided, bad faith effort to ignore any and all obligations under all-risks property and business and interruption policies like” the plaintiff’s. Id. at ¶¶80-83.


The owner of a lounge and bar in Texas sued Crum & Forster and its insurance agent in Texas state court (Harris County), asserting claims for deceptive trade practices and common law fraud. The Complaint alleges that the defendants told the plaintiff that it had a business interruption insurance policy that would cover all losses “that included anything that would prevent the business from op