Daphne Zhang | June 9, 2020

Mutual Insurance Co. has urged a New York federal judge to toss a suit brought by Time Inc. demanding $6.9 million in indemnification of settlement and defense costs for class actions accusing the magazine company of deceptive marketing, saying that Time’s “intentional” unfair business practice is not covered by its policy.

Mutual claimed Monday that the global media liability policy it sold to Time only covers claims for “negligence,” but magazine subscribers have alleged that Time “knowingly” and “willfully” engaged in false advertising for automatic payment renewals, so Time’s practice was not “negligent” and Mutual has no obligation to cover its costs.

In the motion, Mutual said its policy specifically excludes coverage for unfair business practices and false advertising, both of which were alleged by Time’s readers. The insurer added that the consumers sought restitution of subscription fees as a result of Time’s allegedly false marketing, but that the policy does not pay for any loss in the form of “restitution.”

Time called Mutual’s move for summary judgment “an ambitious and unachievable goal” in its motion for partial summary judgment also filed Monday, claiming that a big part of the settlement payment constituted “loss” under its policy with Mutual. The magazine company demanded that “at a minimum” Mutual must pay for a significant part of its $4.98 million settlement expense.

Time and its subsidiary Synapse Group Inc. were sued by two California residents in May 2016, alleging that Time enrolled them in automatic subscription renewal without their consent and failed to inform them of the higher charges as required by California Law, according to court filings. The magazine readers told California state court that Time used Synapse as a marketing agent to indirectly trick them into annual renewals after the initial free or discounted offers.

The class representatives’ counsel filed another complaint against Synapse in June 2018, alleging that Synapse was aware of consumer complaints but still engaged in false marketing. Four months later, Time and the class representatives reached a settlement that required Synapse to pay $4.9 million.

Time first sought coverage from Mutual in June 2016, a month after it was first sued by the magazine subscribers. Mutual denied its claims a month later, saying the policy did not cover restitution and excludes coverage for unfair business practices, false advertising and disputes over fees.

Time sued the insurer in July 2018 seeking indemnification for its defense costs, and amended the complaint in 2019, after approval of the class action settlement, asking for coverage of more than $6.9 million from the two class actions.

In Monday’s motion, Mutual said it has no duty to reimburse Time and Synapse for the $4.98 million settlement payment and $2.18 million in defense costs since the consumers were only trying to recover “restitutionary damages.” The policy specifically stated that covered loss does not include restitution, it added.

Time countered on Monday that “irrespective of whether the policy definition of loss excludes coverage for restitution,” Mutual must still pay all of Time’s loss and defense costs in a legal proceeding as dictated by the policy, adding that the two class actions have caused it serious financial risk.

The media company said that under New York law, an insurer’s duty to defend is “exceedingly broad,” and Mutual should provide a defense whenever “the allegations of the underlying complaint suggest a reasonable possibility of coverage,” as its allegations already have.

Time also struck back at Mutual’s contention that neither action against Time and Synapse “contained a cause of action for negligence,” so it would not provide indemnification.

The consumers’ allegations trigger coverage since Mutual had agreed to pay legal proceeding expenses from “negligence, including any actual or alleged error, omission, misstatement” of the policyholder, Time argued.

The media company said that it was accused of failing to show offers in a “clear and conspicuous” manner as well as failing to provide an acknowledgment of subscription terms and cancellation policy. Those allegations are plainly “an alleged ‘error,’ ‘omission,’ or ‘misstatement,'” it claimed.

The magazine company added that Mutual’s arguments that the policy exclusions bar coverage do not apply. The policy exclusions are only relevant to “antitrust, price-fixing, and restraint of trade” claims, and the consumers never alleged such claims against Time, the media company said.

Additionally, “the false advertising exclusion applies only to intentional conduct” and “several of the complaints’ allegations do not allege that Time intentionally violated California law,” it said in the motion on Monday.

Mutual had argued that at the core of the consumers’ class suits are “allegations that Time and Synapse violated multiple consumer protection laws by engaging in unfair business practices,” and California enacted a law in 2006 specifically targeting marketing practice like Time’s ongoing charging of consumers’ payment cards without their explicit consent. So there is no question that the companies engaged in unfair business acts and false marketing, both of which were excluded under the policy, Mutual said.

Representatives from both parties did not immediately reply to requests for comment.

Mutual Insurance Co. is represented by William Joseph Brennan and Jacob Jonathan Palefski of  Kennedys CMK LLP.

Time and Synapse are represented by Jesse Bair and Timothy W. Burns of Burns Bowen Bair LLP and Jalina Joy Hudson of Perkins Coie LLP.

The case is Time Inc. v. Mutual Insurance Company Limited, case number 1:18-cv-06835, in the U.S. District Court for the Southern District of New York.

Alicia Grzadkowska | June 9, 2020

Insurers are opposing the consolidation of more than 100 federal lawsuits filed by US companies arguing that they should receive business interruption coverage stemming from COVID-19 shutdowns.

The insurance industry has filed more than 24 briefs opposing multidistrict litigation, following in the footsteps of arguments posed in a brief by two Chubb affiliates that stated consolidation would complicate and prolong the litigation, according to Reuters. The insurers were joined by plaintiffs’ firms, some with MDL experience, who also don’t want their cases moved to a nationwide, multidefendant proceeding.

“There is no reason for a single federal court in one part of the country to interfere with the process of policy interpretation here on a state-by-state basis especially given the lack of uniformity among the policies in question and the differing circumstances surrounding each policyholder’s loss,” read one brief filed by King & Spalding, which is representing 50-plus businesses suing Society Insurance for denying COVID-19 claims.

The MDL judicial panel will consider two motions to consolidate cases when it convenes at the end of July. The consolidation motions filed in April by the plaintiffs’ lawyers Levin Sedran & Berman and Golomb & Honik, as well as DiCello Levitt Gutzler, the Lanier Law Firm, Burns Bowen Bair and Daniels & Tredennick proposed relatively similar arguments for consolidating claims, arguing that policyholders are entitled to coverage under property damage or civil authority provisions.

The motions also argued that it would be more efficient for one court to determine outcomes that will affect thousands of businesses, versus various judges around the country delivering potentially contradictory rulings on the same questions.

On the other hand, the briefs opposing consolidation generally stated that consolidation motions are fundamentally flawed because these cases aren’t the same. Each claim deals with different insurers, different policy language, different state insurance laws, different COVID-19 shutdown orders, and different facts at every business asserting a claim for coverage. Litigation thus won’t be simplified by consolidating the cases.

“Instead, shoehorning all of these cases into a single forum for coordinated pretrial proceedings could delay their ultimate resolution by years, with no corresponding benefits in the form of efficient and effective resolution,” said one brief.

The Chubb brief also highlighted that the MDL panel is typically reluctant to consolidate litigation against multiple defendants, and that the lawsuits filed name 36 different insurance groups and 115 individual insurers. In fact, there have been only two insurance coverage MDLs ever created, and both go back more than 25 years. As recently as 2018, the panel refused to create an MDL for insurance claims stemming from hurricanes in Florida, Puerto Rico, and the Virgin Islands.

Plaintiffs’ firms opposing an MDL also said they’re concerned about delaying a decision for their clients. McKool Smith’s client, for example, is the New York City real estate developer Thor Equities and needs a quick resolution of claims it has asserted under its $750 million property damage coverage. A delay could mean the business survives or dies.

DiCello Levitt, which is leading arguments that business interruption insurance cases should be consolidated in Chicago, plans to offer up a response to insurers and plaintiffs’ firms opposed to the MDL when it files a reply brief next week.

 

https://www.insurancebusinessmag.com/au/news/breaking-news/insurance-industry-fights-back-against-business-interruption-lawsuits-224652.aspx

Amanda Bronstad | April 27, 2020 | The original version of this story was published on The Legal Intelligencer

Podhurst Orseck in Miami is among the law firms suing Lloyd’s of London underwriters for denying claims, and the flow of new cases is growing.

Anticipating growth in the number of business-interruption lawsuits being filed against insurance companies in the wake of COVID-19, two groups of lawyers are seeking a multidistrict litigation proceeding to coordinate all the cases.

Many plaintiffs firms accustomed to the MDL arena are piling into new cases. Chicago and Philadelphia have been nominated to host consolidated cases.

Dozens of small businesses are suing their insurers, including Lloyd’s of London underwriters, Chubb and Admiralty Indemnity Co., alleging they rejected claims for economic losses caused by government shutdowns over the coronavirus pandemic.

“This issue — whether business interruption insurance policies will cover losses incurred by businesses forced to shutter their business as a result of the governmental orders—is one of national importance and great significance to the ultimate survival of many businesses,” plaintiffs attorney Richard Golomb wrote in a motion filed Monday before the U.S. Judicial Panel on Multidistrict Litigation. “This is a monumental issue.”

Podhurst Orseck filed a lawsuit Monday against Lloyd’s underwriters, Axis Specialty Europe SE and HDI Global Specialty SE in the Southern District of Florida, and the firm combined with Boies Schiller Flexner on another case filed in Miami federal court last week against Chubb Ltd. and Westchester Surplus Lines Insurance Co.

Podhurst Orseck managing partner Steven Marks said Tuesday that the firm has not adopted a formal position on an MDL but would oppose locations in Pennsylvania and New Jersey, a major insurance headquarters state.

“Given the volume of these claims and the differences in the policies, even for the same insurer, we think that an MDL will be unmanageable,” he said by email. “While a nationwide MDL against all insurers seems unlikely, It is conceivable that the MDL panel could have multiple MDLs in several locations” by insurer.

Overall, Marks said this is “not an easy one to predict.”

Golomb’s firm, Golomb & Honik, and Levin Sedran & Berman, which joined in the motion, represent Philadelphia eateries River Twice and Chops in two lawsuits. They want to coordinate all the cases in the Eastern District of Pennsylvania and have suggested Judge Timothy Savage, who has not handled MDLs before.

“The Covid-19 business interruption litigation is obviously a complex case that has national ramifications and requires a national solution,” Golomb said in an email. “As a result, we believe there is no better method than multi-district litigation to efficiently work toward a fair and timely resolution for all small businesses involved.”

On Tuesday, attorneys Adam Levitt of Chicago’s DiCello Levitt Gutzler and Mark Lanier of The Lanier Law Firm, who filed six class actions against insurers, suggested an MDL in the Northern District of Illinois before Judge Matthew Kennelly, who sits on the MDL panel. Joining them were Burns Bowen Bair in Madison, Wisconsin, and Daniels & Tredennick in Houston.

Cases have been filed in federal courts in Illinois, Florida, Pennsylvania, New York, Wisconsin, Ohio, California, Oregon and Texas. One motion references another nine state court lawsuits filed in Oklahoma, Louisiana, California, Texas, Indiana, Wisconsin and Washington, D.C.

The motions focused on 16 cases filed in federal courts against eight insurers, but Golomb predicted an “avalanche of cases.” Tuesday’s motion referenced statements from The Hartford and Travelers, not defendants as yet, insisting their business-interruption coverage included losses from physical damage caused by hurricanes, fires, winds or theft — not a virus. They also noted Allstate, Zurich and Allianz, also not defendants, have headquarters in Illinois.

Acknowledging the potentially large number of MDL defendants, both motions said the cases were all about the common issue of business-interruption insurance policies. They referenced other cases, like those brought against more than a dozen companies that distribute and manufacture opiate pharmaceuticals. More than 2,700 lawsuits over the opioid crisis are coordinated in an MDL in the Northern District of Ohio.

“While there is a multiplicity of parties across these litigations, the panel — in cases like Opioids, Chinese Drywall, TVM and the like — has repeatedly demonstrated its belief that, even in the most sprawling actions, coordinating pretrial processes in a single court, before a single judge, is preferable to any alternative approach,” Levitt said in an email. He prefers Chicago because it’s “a major U.S. insurance hub, as well as its central location, which is needed for this nationwide litigation.”

Insurance defendants are due to respond to the MDL panel next month.

A. J. Bayatpour, Reporter, WKOW 27 | April 23, 2020

MADISON (WKOW) — Madison Sourdough, a popular Williamson Street bakery, has filed a lawsuit in federal court against its property insurer. The bakery claims Society Insurance rejected its claim for damages from lost business due to the COVID-19 pandemic and subsequent “safer at home” order in Wisconsin.

“American businesses are going to be experiencing billions and billions of dollars of losses and these same businesses paid a lot of money to have business interruption insurance,” said Tim Burns, the attorney representing Madison Sourdough in the lawsuit.

According to the federal suit, filed in the Eastern District of Wisconsin, Madison Sourdough claims that “in the special property coverage form, Society Insurance did not exclude or limit coverage for losses from viruses.”

Rebecca Kollman, Corporate Marketing Manager for the Fond du Lac-based insurer said Thursday that the company does not comment on ongoing litigation.

“We look forward to a favorable resolution of this situation in the near future,” Kollman said.

Andy Franken, President of the Wisconsin Insurance Alliance, said it is not reasonable to expect property insurers to cover losses related to COVID-19.

“Under the contracts that are vastly used in the industry, virus protection is excluded,” Franken said. “Premiums were not collected to pay for this type of payout.”

The lawsuit argues that “contamination” is cause for the insurer to pay out a claim; Burn said COVID-19 constitutes contamination as it resulted in the closure or suspension of business.

Madison Sourdough is currently allowing customers to place orders ahead of time and pick them up on Fridays and Saturdays.

“(Insurers are) not behaving in the way they promised to behave, they aren’t behaving in the way they told regulators their policies worked,” Burns said.

Burns said he is combining the lawsuit with several other similar cases in a Chicago federal court. He said his goal is to help create a large class action case involving numerous businesses and their insurers.

Burns said he suspects the end result will be a large single settlement with insurers funding a payout to each of the plaintiff businesses.

“The defendant, in this case, the insurance companies, will eventually come to the point where they agree to put up X amount of money that ensures their survival but still gives a large portion of these claims paid,” Burns said. “And that’s likely what will happen here.”

 

Amanda Bronstad | April 23, 2020

Efforts to coordinate business-interruption lawsuits against insurance firms focus on 16 cases so far filed in federal courts against eight insurance firms, but Richard Golomb, of Golomb & Honik, predicts an “avalanche of cases.”

Anticipating a flood of business-interruption lawsuits against insurance firms in the wake of COVID-19, two groups of lawyers have sought to create a multidistrict litigation proceeding that would coordinate all the cases.

Anticipating a flood of business interruption lawsuits against insurance firms in the wake of COVID-19, two groups of lawyers have sought to create a multidistrict litigation proceeding that would coordinate all the cases.

Dozens of small businesses have sued a spate of insurance firms, including Certain Underwriters of Lloyd’s of London and Admiralty Indemnity Co., alleging they rejected coverage for economic losses caused by government shutdowns over coronavirus.

“This issue—whether business interruption insurance policies will cover losses incurred by businesses forced to shutter their business as a result of the governmental orders—is one of national importance and great significance to the ultimate survival of many businesses,” wrote plaintiffs’ attorney Richard Golomb, in a motion filed on Monday before the U.S. Judicial Panel on Multidistrict Litigation. “This is a monumental issue.”

Golomb’s firm, Golomb & Honik, and Levin Sedran & Berman, which joined in the motion, represent Philadelphia eateries River Twice and Chops in two lawsuits. They want to coordinate all the cases in the Eastern District of Pennsylvania and have suggested Judge Timothy Savage, who has not handled multidistrict litigation before.

“The Covid-19 business interruption litigation is obviously a complex case that has national ramifications and requires a national solution,” Golomb said in an email. “As a result, we believe there is no better method than multi-district litigation to efficiently work toward a fair and timely resolution for all small businesses involved.”

On Tuesday, attorneys Adam Levitt, of Chicago’s DiCello Levitt Gutzler, and Mark Lanier, of The Lanier Law Firm, who filed six class actions against insurance firms, filed a motion that sought a multidistrict litigation proceeding in the Northern District of Illinois before Judge Matthew Kennelly, who sits on the MDL panel. Joining them were Burns Bowen Bair in Madison, Wisconsin, and Daniels & Tredennick in Houston.

The cases are in federal courts in Illinois, Florida, Pennsylvania, New York, Wisconsin, Ohio, California, Oregon and Texas. One motion references another nine lawsuits in state courts in Oklahoma, Louisiana, California, Texas, Indiana, Wisconsin and Washington D.C.

The motions focus on 16 cases so far filed in federal courts against eight insurance firms, but Golomb predicted an “avalanche of cases.” Tuesday’s motion referenced statements from The Hartford and Travelers, neither of which is one of the defendants, insisting that their business interruption coverage included losses from physical damage caused by hurricanes, fires, winds or theft—not a virus. They also noted that Allstate, Zurich and Allianz, none of which are named in the suits, have headquarters in Illinois.

Acknowledging the potentially large number of defendants in such an MDL, both motions said the cases were all about the common issue of business interruption insurance policies. They also referenced the cases brought against more than a dozen companies that distribute and manufacture opiate pharmaceuticals. More than 2,700 lawsuits over the opioid crisis are coordinated in multidistrict litigation in the Northern District of Ohio.

Insurance defendants are due to respond to the MDL panel next month.

 

https://www.law.com/2020/04/23/lawyers-suing-insurance-firms-over-covid-19-coverage-seek-mdl/?slreturn=20200324092141

Alicja Grzadkowska |April 22, 2020

The business interruption litigation landscape continues to heat up in the midst of COVID-19, with big names like Chef Thomas Keller jumping in to sue his insurer over coronavirus business interruption claims and other businesses following suit.

In a recent development, two motions were filed on April 20 with the Judicial Panel on Multidistrict Litigation (JPML) that asked the panel to consolidate federal suits accusing insurers of dodging claims by businesses that were shut down by government orders, according to Reuters. Motions for JPML consolidation are typically a way for plaintiffs’ firms to name themselves as the leaders of developing litigation, added Reuters’ Alison Frankel.

The first of these motions involves Levin Sedran & Berman and Golomb & Honik, and argues that the question of whether business interruption insurance policies will cover losses incurred by these businesses can’t be answered in piecemeal by different courts around the US because of its significant national importance. The second bid, which was filed by DiCello Levitt Gutzler, the Lanier Law Firm, Burns Bowen Bair and Daniels & Tredennick, underscored the efficiency of centralized expert epidemiology discovery and legal analysis.

The key issues across the complaints filed against insurers so far are whether COVID-19 causes physical damage or property loss, and whether insurance coverage is triggered when the virus is present on or near a policyholder’s property, as argued in the brief.

However, Frankel noted in the Reuters report that it’s not definitive that the cases will be consolidated. Law professors Alexandra Lahav of the University of Connecticut and Elizabeth Burch of the University of Georgia told the reporter that the JPML has become reluctant to create new multidistrict litigation (MDL). Lawsuits involving contract disputes, which includes insurance policies, only have a 40% chance of consolidation, said Burch.

Meanwhile, Daniel Schwarcz, a University of Minnesota law professor who specializes in insurance law and regulation, said that the plaintiffs’ firms are correct that some “important legal and factual issues” span policyholders’ claims. For example, if businesses were ordered shut because of the physical presence of the virus, this could be covered by business interruption insurance, but if they were ordered shut because of the risk of the virus spreading, this would likely not be covered.

However, insurance law questions are matters of state law, according to Schwarcz, and each state has their own precedent on how they define physical loss or damages. Similarly, language on business interruption insurance is varied across policies and so is the language around shutdown orders issued by state governors.

“It is difficult to see how a consolidated action would deal with these variations,” Schwarcz told Reuters. “There are immense complications … that may ultimately prove insurmountable.”

At the same time, some plaintiffs’ lawyers are resisting consolidation. John Houghtaling of Gauthier Murphy & Houghtaling filed the first business interruption suit around the coronavirus shutdown and is working with Thomas Keller and other celebrity chefs to advocate for restaurants demanding cover from insurers. These cases are not removable to federal court and would thus not be part of an MDL in federal court. The lawyer is also opposed to consolidation, calling it “inefficient and inappropriate.”

Insurance defense lawyer James Martin of Zelle added that a business interruption coverage MDL might make sense down the road, but the recent requests seem premature since less than two dozen business interruption suits have been filed in federal court.

“With that limited subset, how can the JPML identify the common questions of fact to fashion an order that will identify which of the hundreds or thousands of later-filed cases will get transferred for coordinated or consolidated pretrial proceedings?” said Martin. “Should the MDL include class actions (which we think are particularly ill-suited for business interruption claims)?  Should the MDL be limited to certain types of policies or particular questions?”

But plaintiffs’ lawyer Levin said consolidation in an MDL would ensure consistency across what he expects to be significant litigation.

“It’s a managerial tool,” he said to Reuters. “The courts are going to have to look at it and say, ‘What do we want? Do we want this litigated in every jurisdiction? In every division of every jurisdiction?’”

The DiCello Levitt group’s brief argued that a business interruption insurance MDL could address important questions about property insurance, COVID-19, and government-ordered shutdowns, stating that “the same type of evidence will be needed in every case to consider and ultimately to determine whether COVID-19 caused or constituted ‘physical damage or loss to property.’”

 

https://www.insurancebusinessmag.com/us/news/breaking-news/litigation-over-business-interruption-insurance-heats-up-220358.aspx

Joanna Fantozzi | Apr 20, 2020

A wave of lawsuits seeking class-action status argue restaurants have been unfairly denied business interruption insurance claims

Another five lawsuits seeking class-action status have been filed by restaurants and hospitality groups against the insurance companies that are denying business interruption insurance claims in response to COVID-19-related restaurant closures.

The initial named plaintiffs in these cases include Gio Pizzeria and Bar Hospitality (owner of Nick’s New Haven Style Pizzeria & Bar in Cold Springs and Boca Raton, Fla.); Caribe Restaurant and Nightclub Inc. (owner of La Luz Ultralounge in Bonita, Calif.); Rising Dough Inc. (owner of Madison Sourdough bakery in Madison, Wis.) and Will McCoy’s (owner of seven prohibition-themed taverns in the Twin Cities area, Minn.); Troy Stacy Enterprises (owner of Craft & Vinyl in Columbus, Ohio), and Dakota Ventures LLC (owner of Kokopelli Grill in Port Angeles, Wash.)

These lawsuits, which were filed Friday, are the latest in a string of similar cases filed by foodservice businesses that have been denied business interruption insurance coverage, including that of chef Thomas Keller, who sued his insurance company for declaratory judgments on behalf of business interruption insurance claims. The wave of lawsuits filed last week allege that the restaurants’ insurance companies are compelled to follow through in paying these claims because they either do not have virus exclusions in their contracts or because the case for the virus exclusion is not strong enough.

In response to the growing number of lawsuits, insurance providers have made the argument that COVID-19 is an exception, and that business interruption insurance was never meant to cover a universal catastrophe such as this pandemic, insurance groups wrote in a letter to members of Congress.

Related: Chefs, law firm form coalition to fight for insurance claims related to coronavirus

But attorneys for the restaurant operators contend that the businesses will not survive if insurance companies do not honor their policies.

“All of these companies paid a lot of money in monthly premiums for years for coverage with this very type of situation only to be told now when the rainy day actually comes that their insurance company is turning their backs on them,” said Adam Levitt, attorney at DiCello Levitt Gutzler LLC, one of several law firms representing the companies in these five cases. “If these insurers won’t honor their own policies, lots of businesses will be unable to survive. As we see it, these lawsuits represent these restaurants’ only means of compelling insurance companies to fulfill promises that they made to our clients and to thousands of other U.S. businesses.”

For example, in one of the lawsuits, Gio Pizzeria and Bar Hospitality alleges that their insurance company, Certain Underwriters at Lloyd’s of London, agreed to “pay for direct physical loss unless the loss is excluded or limited in the policies, and that viruses were not listed in the policy exclusions.

In another of the lawsuits, Caribe Restaurant and Nightclub’s insurance company, Topa Insurance Company, does have a virus exclusion, but the lawsuit alleges it only covers international acts of “nuclear, biological, bio-chemical, chemical or radioactive agent, substance, material, device or weapon.” The spread of a virus like COVID-19 would not be an intentional act or weapon, and therefore the insurance company’s claim of an exception is not legally applicable.

“Insurance companies are theoretically all about the evaluation and management of risk, so they charge businesses for their policies based on perceived risk,” Levitt said. “For an insurance company to now walk away from its obligations that it prospectively evaluated is wrong.”

 

https://www.nrn.com/news/five-more-foodservice-operators-take-court-compel-coverage-business-interruption-claims-covid

 

 

April 21, 2020

A Minnesota dentist, an Ohio bridal shop and a New York pizzeria are among six small businesses that are the latest to sue insurers seeking compensation for business interruption claims due to the coronavirus crisis.

The lawsuits, which are class actions, have been filed against Aspen American Insurance, Auto-Owners Insurance, Lloyd’s of London, Society Insurance, Oregon Mutual Insurance, and Topa Insurance Co.

The plaintiffs include a San Diego restaurant and nightclub; a Cleveland-area bridal retailer; a Madison, Wisconsin bakery and cafe; a Minnesota chain of restaurants and bars; a St. Paul, Minn. dental practice; a Portland, Ore. restaurant; and a New York restaurant group and pizzeria.

Each of the lawsuits claims that the businesses purchased business income insurance coverage, which promises to pay for losses due to necessary suspension of operations. In all instances, according to the lawyers, these coverages “either included or did not expressly or effectively exclude losses caused by viruses such as COVID-19,” which caused state and municipal governments to mandate widespread business closures.

“Despite these facts, the insurers have, on a broad and uniform basis, refused to uphold their contractual responsibilities for losses suffered due to COVID-19, as well as losses caused by executive orders by civil authorities and any efforts to prevent further property damage or to minimize the suspension of business and continue operations,” the plaintiffs contend.

The plaintiffs argue that their property insurance policies are all-risk property damage policies that “cover all risks of loss, except for risks that are expressly and specifically excluded.”

The law firms bringing the cases are DiCello Levitt Gutzler in Chicago; The Lanier Law Firm in Houston; Burns Bowen Bair in Madison, Wisconsin; and Daniels & Tredennick is a trial firm in Houston.

Litigation has been building against insurers over coronavirus business interruption. The cases are part of a series of cases that has the property/casualty insurance industry publicly arguing that most business interruption or contingent business interruption policies require that there is direct physical loss or damage. The industry also notes that many policies also exclude communicable diseases, although there are some policies with coverage options for fungi, bacteria or virus.

There are also some business interruption policies that provide coverage if government denies access to a property.

President Donald Trump commented on business-interruption claims last week, stating that unless the policy excludes pandemics, insurers should pay and several states are considering legislation to force insurers to pay, although“

The cases include:

  • Gio Pizzeria & Bar Hospitality, LLC and Gio Pizzeria Boca, LLC v. Certain Underwriters at Lloyd’s, London, U.S. District Court for the Southern District of New York
  • Rising Dough, Inc., et al. v. Society Insurance, U.S. District Court for the Eastern District of Wisconsin
  • Bridal Expressions LLC v. Owners Insurance Company, U.S. District Court for the Northern District of Ohio
  • Caribe Restaurant & Nightclub, Inc. v. Topa Insurance Company, U.S. District Court for the Central District of California
  • Dakota Ventures, LLC d/b/a/Kokopelli Grill v. Oregon Mutual Insurance Co.;U.S. District Court for the District of Oregon
  • Christie Jo Berkseth-Rojas DDS v. Aspen American Insurance Company; U.S. District Court for the Northern District of Texas

 

https://www.insurancejournal.com/news/national/2020/04/21/565507.htm

Adrian Ladbury |

The legal assault by US policyholders on business interruption (BI) policies to seek redress for the massive losses incurred by the Covid-19 pandemic has been stepped up a notch as four leading law firms filed a series of actions against six insurers, including underwriters at Lloyd’s of London, in what they describe as the “broadest effort yet” to force insurers to pay up on BI policies.

The insurance industry in the US and worldwide was quick to deny coverage under BI policies, pointing out that the pandemic risk had been excluded from virtually all policies since the SARS outbreak in 2003. Insurance associations in the US have warned that legislative efforts in seven states so far to retroactively open up the BI policies to the risk coupled with legal action could bankrupt the sector. The insurers also argued that such a retroactive change in contract law would be unconstitutional.

But these latest class actions and other recent suits being prepared in the US and UK suggest that many plaintiffs may not actually need a retroactive change in the BI contracts to win damages. It seems that the BI policy wordings issued by many insurers are not as watertight as they originally claimed and the plaintiff lawyers clearly smell blood.

“In all instances, these coverages either included or did not expressly or effectively exclude losses caused by viruses such as Covid-19, which caused state and municipal governments to mandate widespread business closures,” reads the statement issued by the four law firms carrying out the class actions.

In this case, the plaintiffs are represented by DiCello Levitt Gutzler, The Lanier Law Firm, Burns Bowen Bair, and Daniels & Tredennick. The insurers named in the lawsuits are Lloyd’s of London, Aspen American Insurance, Auto-Owners Insurance, Society Insurance, Oregon Mutual Insurance, and Topa Insurance Company.

Initial plaintiffs include a San Diego restaurant and nightclub; a Cleveland-area bridal retailer; a Wisconsin-based bakery and cafe; a local Minnesota chain of restaurants and bars; a St Paul, Minnesota dental practice; a Portland, Oregon restaurant; and a New York restaurant group and pizzeria.

The law firms issued a joint statement on 17 April that states: “US businesses decimated by the Covid-19 pandemic today filed federal class-action lawsuits against six insurance companies for denial of policy claims they had purchased to protect against business interruptions. The suits represent the broadest effort yet to compel insurance companies to fulfil promises made to hundreds of thousands of US businesses that purchased insurance coverage to protect against precisely this situation.

“Businesses nationwide have, for years, purchased expensive insurance policies to protect them from losses exactly like those they are currently enduring. Each of the lawsuits claims that the businesses purchased special property insurance coverage to protect against business interruptions or disruptions outside of their control. These policies included business income coverage, which promises to pay for losses due to necessary suspension of operations. In all instances, these coverages either included or did not expressly or effectively exclude losses caused by viruses such as Covid-19, which caused state and municipal governments to mandate widespread business closures.

“Despite these facts, the insurers have, on a broad and uniform basis, refused to uphold their contractual responsibilities for losses suffered due to Covid-19, as well as losses caused by executive orders by civil authorities and any efforts to prevent further property damage or to minimise the suspension of business and continue operations.”

Adam Levitt, co-counsel to the plaintiffs and a partner at DiCello, Levitt Gutzler, said: “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.”

The statement said that most property insurance policies sold in the US, 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.

“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 honouring 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 US economy.”

Timothy Burns, a partner at Burns Bowen Bair, added: “Countless businesses across the United States are pinning their hopes of reopening and rehiring laid-off or furloughed employees on proceeds from insurance. Insurance companies thrive by selling protection against maladies of all kinds. They pocket huge profits when material events are avoided but must bear the responsibility of honouring their policies on the rare occasions when these events occur. By refusing to do so, they are not running a business at all, but a large-scale rigged carnival game where no matter the scenario, the customer always loses. It’s just not right, and we will do everything in our power to ensure that these businesses are made whole.”

As suggested above, US insurers and international surplus lines insurers do appear to face a serious threat from these suits because of the nature of the all-risks policies sold in the US and a building case for the pandemic to be determined as a form of physical damage.

The suit filed on behalf of New York-based Gio Pizzeria against underwriters at Lloyd’s shows the scale of the threat posed to the BI policies.

It states: “In many parts of the world, property insurance is sold on a specific peril basis. Such policies cover a risk of loss if that risk of loss is specifically listed (such as hurricane, earthquake, H1N1, etc.). Most property policies sold in the United States, however, including those sold by underwriters insurance, are all-risk property damage policies. These types of policies cover all risks of loss except for risks that are expressly and specifically excluded. Under the heading ‘covered causes of loss’, underwriters agreed to pay for direct physical loss ‘unless the loss is excluded or limited’ in the policies.”

The suit continues: “Underwriters did not exclude or limit coverage for losses from viruses in plaintiffs’ policies or those of the other class members. Losses due to Covid-19 are a covered cause of loss under the underwriters’ policies with the special property coverage form.

And it adds: “In the special property coverage form, underwriters agreed to pay for insureds’ actual loss of business income sustained due to the necessary suspension of their operations during the ‘period of restoration’ caused by direct physical loss or damage. A ‘slowdown or cessation’ of business activities at the covered property is a ‘suspension’ under the policy, for which underwriters agreed to pay for loss of business income during the ‘period of restoration’ that begins 72 hours after the time of direct physical loss or damage.

“The presence of virus or disease can constitute physical damage to property, as the insurance industry has recognised since at least 2006. When preparing so-called ‘virus’ exclusions to be placed in some policies, but not others, the insurance industry drafting arm, ISO, circulated a statement to state insurance regulators that included the following: ‘Disease-causing agents may render a product impure (change its quality or substance), or enable the spread of disease by their presence on interior building surfaces or the surfaces of personal property.’

“When disease-causing viral or bacterial contamination occurs, potential claims involve the cost of replacement of property (for example, the milk), cost of decontamination (for example, interior building surfaces), and business interruption (time element) losses. Although building and personal property could arguably become contaminated (often temporarily) by such viruses and bacteria, the nature of the property itself would have a bearing on whether there is actual property damage. An allegation of property damage may be a point of disagreement in a particular case.”

For some time now, senior claims experts in the London market in particular have warned of the lack of investment made in recruitment, training and education of claims specialists as the insurers fought hard to win business and tightly control costs during the long soft market. Those insurers that shifted investment away from the claims function towards sales may soon be regretting the decision. It seems increasingly likely that equity analysts may soon be basing their advice to investors on which insurers and reinsurers to invest in based on the quality of their claims and wordings staff.

 

By Heather Turner | 

In the U.S.

According to John Hopkins University (as of April 20, 2020):

  • Total U.S. cases: 760,570
  • Total U.S. deaths: 40,724

RIMS issued a letter to the U.S. Department of the Treasury, Congress and President Trump requesting the creation of a pandemic risk insurance program to accelerate economic recovery. In the letter, RIMS asserts that a pandemic risk insurance program would provide greater access to capital from lenders and establish a viable insurance market. It would also provide greater resilience to U.S. organizations in the event of a future pandemic.

Rep. Mike Thompson (D-Calif.) introduced the Business Interruption Insurance Coverage Act of 2020, a bipartisan bill to ensure businesses that purchase interruption insurance won’t get their claims denied because of major events, such as the coronavirus pandemic. In response, industry leaders voiced opposition to the bill, with one saying the bill, and others like it, “would apply business interruption coverage where it doesn’t exist, exacerbating existing disruptions and further delaying our nation’s economic recovery.”

Six class-action lawsuits were filed on Friday (April 17) against insurance companies for denial of policy claims businesses had purchased to protect against business interruptions, according to a press release. The plaintiffs are represented by DiCello Levitt Gutzler LLC, Lanier Law Firm PC, Burns Bowen Bair LLP, and Daniels & Tredennick. The cases include:

  • Gio Pizzeria & Bar Hospitality, LLC and Gio Pizzeria Boca, LLC v. Certain Underwriters at Lloyd’s, London, U.S. District Court for the Southern District of New York
  • Rising Dough, Inc., et al. v. Society Insurance, U.S. District Court for the Eastern District of Wisconsin
  • Bridal Expressions LLC v. Owners Insurance Company, U.S. District Court for the Northern District of Ohio
  • Caribe Restaurant & Nightclub, Inc. v. Topa Insurance Company, U.S. District Court for the Central District of California
  • Dakota Ventures, LLC d/b/a/Kokopelli Grill v. Oregon Mutual Insurance Co.; U.S. District Court for the District of Oregon
  • Christie Jo Berkseth-Rojas DDS v. Aspen American Insurance Company; U.S. District Court for the Northern District of Texas

Boston Scientific Corp. will start manufacturing a low-cost ventilator.  The technology was recently approved for emergency use by the USDA.

More than 22 million Americans filed for unemployment within the past month — a level of job loss not seen since The Great Depression, says The Washington Post.

President Trump offered state governors a “road map” to reopen economies on Thursday (April 16) that includes three phases.

On Sunday (April 19), demonstrations in cities around the U.S. escalated as protesters demanded the reopening of their local economies, as House Conservatives call for the country to reopen immediately. According to Reuters, around 2,5000 gathered at the Washington state capitol to protest the state’s stay-at-home order. In Denver, health care workers stood in counter-protest against people who gathered at the state capitol demanding the end of the state’s shutdown. Maryland, Michigan, Ohio, Kentucky, Minnesota, North Carolina, Utah also saw protests over the weekend.

United Airlines said it expects a $2.1 billion loss in first-quarter 2020 as a result of dramatic declines in travel from the coronavirus.

The CEO of Chubb, Evan Greenberg, told Bloomberg this regarding pressuring insurers to cover business interruption losses: “The insurance industry is a fundamental part of the economic plumbing of this country. Forcing insurers to foot the bill for losses not covered by policies “would do great damage. It would bankrupt the industry.”

Around the world

According to the World Health Organization (as of April 20, 2020):

  • Total cases globally: 2.31 million
  • Total deaths globally: 157,847

The U.S. (760,570), Spain (195,944), Italy (178,972), Germany (141,672), and the U.K. (120,071) have the most reported coronavirus cases globally.

Catastrophe risk modeling firm AIR Worldwide launched its COVID-19 Projection Tool that provides COVID-19 case and death projections worldwide for the next four weeks. The data will be updated daily.

The Financial Conduct Authority in the U.K. says there are clear cases where insurers should pay claims to small and medium-sized enterprises for business interruption claims stemming from COVID-19.

The European Union has drafted plans for a partial lifting of restrictions and to get people back to work to help alleviate the economic pains brought on by COVID-19-caused shutdowns.

Greece is extending its ban on flights to and from the U.K., the Netherlands, Turkey, Spain and Itlay until May 15.

In an interview with Bloomberg Television, Allianz SE Chief Executive Officer Oliver Baete said, “The coronavirus has hit our industry like a meteorite impact… There will be huge losses for the industry coming, it just takes a while for those to materialize.”

The last three cruise ships at sea will finally arrive at land today. The MSC Magnifica will dock in the south of France; the Costa Deliziosa will dock in Barcelona, and the Pacific Princess will dock in Los Angeles.

Fitch Ratings downgraded Hong Kong’s long-term economic rating to ‘AA-’ from ‘AA,’ with real GDP falling by 5% in 2020.

 

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