Stark and Summit restaurants, bars suing insurers over coronavirus claims

Akron Beacon Journal (OH)

Several local restaurants, bars and a coffee shop closed by the state to slow the spread of COVID-19 are suing their insurers for denying their business interruption insurance claims.

The businesses in Stark County along with a leasing company filed five lawsuits Thursday in Stark County Court of Common Pleas alleging insurers failed to provide promised coverage under their policies.

The plaintiffs are seeking compensatory damages of over $25,000; punitive damages of more than $25,000 and attorneys' fees.

Their law firm -- Tzangas, Plakas and Mannos -- said its attorneys were also in the process of filing three similar lawsuits on behalf of restaurants and bars in Summit County Common Pleas Court.

The Stark County plaintiffs include:

? Gervasi Vineyard in Canton, which is suing National Trust Insurance and Leavitt Group Midwest.

? Carpe Diem Coffee Shop in downtown Canton, which is suing the Cincinnati Insurance Co.

? Nick Sylvester's North End Italian Grille, which is suing State Auto Insurance.

? Nine owners of Basement Bar and Grille locations in Northeast Ohio, which is suing Illinois Casualty Co. and United States Insurance Group.

? McKinley Development Leasing of North Canton, which is owned by developers Bill Lemmon and Bob DeHoff and is suing Westfield Insurance Co. DeHoff and Lemmon own 12 commercial buildings at seven locations with spaces rented by restaurants, a day care center, medical offices, salons and other businesses that closed under the stay-at-home order.

The plaintiffs in the Summit County suits were to be Upper Deck Grille & Patio Bar, Dano's Lakeside Pub, and locations of the Town Tavern and Johnny J's Pub and Grille, said their attorney Gary Corroto of Tzangas Plakas.

On March 15, the state ordered restaurants and bars to close dine-in areas to curtail the spread of COVID-19. Restaurants were allowed to open outdoor dining areas on May 15. Indoor dining areas were allowed to reopen Thursday. Employees, who generally have to wear masks, and customers have to stay six feet apart.

But for two months, the businesses lost much if not all of their sales. Many laid off most of their employees.

The insurers denied the plaintiffs' business interruption insurance claims for thousands to hundreds of thousands of dollars in losses, the legal complaints said.

Most of the policies had exclusions for viruses and bacteria. The plaintiffs' attorneys argued the exclusions did not apply in pandemics or in situations where a government had ordered businesses closed to slow the spread of a virus.

The suit allege that:

? The insurance companies and their agents failed to mention the virus and bacteria exclusions when explaining the policies to the business owners.

? The insurance agents breached their fiduciary duty by failing to inform their clients of the availability of policies without the virus and bacteria exclusions.

? Business closures that resulted from the state-ordered closures constituted physical loss or damage to business property under business interruption policies.The policies also included coverage for situations related to closures ordered by civil authorities.

The plaintiffs' attorneys say insurance companies commonly issue policies that exclude for pandemics and Severe Acute Respiratory Syndrome or SARS, and COVID-19 is considered a SARS illness. The policies of coverage for their clients did not include such exclusions.

"For these local businesses the effects are devastating on their ability to operate," said Corroto, who added that his clients have to figure out how to operate profitably with social distancing restrictions. "They've got some significant financial losses they're going to have to overcome."

Dean Fadel, president of the Ohio Insurance Institute, said he could not comment on the lawsuits because he hadn't read the complaints or the insurance policies.

He said, in broad terms, business interruption insurance covers physical damage to a business' insured property that resulted in a quantifiable loss.

"All those policies have exclusions to protect against catastrophic damages that would cost too much to underwrite or cover," said Fadel, adding insurance only works if not everyone files a claim. "That's why the companies include these exclusions because in these situations everybody has a claim and [if not excluded] it would literally wipe out the insurance industry in three months."

He said the proper source for relief in such a catastrophe was the federal government.

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