More Insurers Hit With COVID-19 Business Coverage Lawsuits

By John Hilton

Six insurers were hit with class-action suits against in federal courts Friday over their denials of coverage for businesses shut down because of the COVID-19 outbreak.

Certain Underwriters at Lloyd's, London in New York, Topa Insurance Co. in California, Society Insurance in Wisconsin, Auto-Owners Insurance Co. in Ohio, Oregon Mutual Insurance Co. in Oregon, and Aspen American Insurance Co. in Texas, the attorneys announced in a news release.

“Businesses nationwide have, for years, purchased expensive insurance policies to protect them from losses exactly like those they are currently enduring,” said Adam Levitt, co-counsel to the plaintiffs’ and a partner at DiCello Levitt Gutzler.

“For many small business owners trying to provide for their families and employees, this type of insurance coverage was an additional expense that they would have preferred not to carry but felt a responsibility to do so. For insurers to now tell them, in the most challenging of times, that the joke was on them and their policies were worthless, is unethical and abhorrent.”

Excluded Or Not?

The issue comes down to whether the pandemic falls under an allowable exclusion to coverage, similar to floods and wars. Most property insurance policies sold in the United States, including those sold by the defendants, are all-risk property damage policies. These types of policies cover all risks of loss, except for risks that are expressly and specifically excluded.

Several lawsuits have been filed nationally to date, with some plaintiffs claiming their business operations were shut down by government decree, not specifically because of the pandemic. Attorneys argue a government decree is not an exclusion.

Plaintiffs in the new lawsuits include bakeries, taverns, restaurants, nightclubs and bridal retailers. Lawsuits were filed in Ohio, New York, Oregon, Texas, California and Wisconsin.

In one of the lawsuits, by Caribe Restaurant & Nightclub in Bonita, Calif., attorneys argue that the insurance policy includes "civil authority," "business income" and "extra expense" coverage, all of which address loss of income due to a government-ordered shutdown. In addition, the Caribe policy does include any exclusions from business losses caused by the spread of a virus.

“Insurers will deny almost every claim – even the most legitimate ones – because that’s just how they operate,” said Mark Lanier, co-counsel to the plaintiffs and founder of The Lanier Law Firm. “But at the end of the day, this really is a straightforward issue about honoring their agreements. As our nation emerges from this horrific pandemic, businesses of all sizes will be critical to restarting the economy. In playing their usual claim-denial games, these insurers are threatening the welfare of not only small-business owners and their families, but the entire U.S. economy.”

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.