As coronavirus spreads across the country, litigation against insurers for denying claims caused by the pandemic is spreading along with it.
A group of Chicago businesses and a Houston-area wig store are the latest litigants to press business-interruption claims against insurance carriers.
Barbara Lane Snowden, owner of the Hair Goals Club, last Thursday filed suit in state court against Twin City Fire Insurance Co., a unit of the Hartford. Snowden said the insurer denied a business-interruption claim after Harris County issued a stay-at-home order that effectively shut down her small wig shop on Main Street in downtown Humble, Texas.
On Friday, several Chicago businesses — including restaurants, pubs and movie theaters — pooled their resources to file suit against Society Insurance for denying their business-interruption lawsuits. The plaintiffs include Big Onion Tavern Group, McBride’s Pub, Happy Camper Pizzeria and the New 400 Theaters Group.
Attorney Christopher J. O’Malley, who represents the Chicago plaintiffs, told the Claims Journal that one of his clients received notice that his claim was denied even before he filed it. O’Malley said the business owner’s insurance agent filed the claim on his customer’s behalf and Society called the policyholder directly.
Society Insurance is a Wisconsin-based mutual carrier that reported written premiums of $206 million in 2019. O’Malley said the carrier specializes in entertainment businesses.
He said although none of the Society policies excluded coverage for a virus or pandemic, the plaintiffs — some of whom are mutual friends and acquaintances — quickly learned that the carrier was not going to pay coronavirus claims.
O’Malley said the insurance industry has made it clear through various blog posts that carriers do not believe that civil orders to prevent possible contamination constitute a physical loss that would trigger business-income claims. The lawsuit states that Society’s CEO issued a memorandum to “agency partners” saying that under Illinois law the policies would likely not cover such stoppages.
He said the fact that insurers exclude viruses and pandemics from coverage demonstrates the point that coronavirus can cause a covered physical loss. Otherwise, why exclude it?
“We don’t think these insurers are honoring their obligations to make a good-faith inquiry and a factual determination before denying these,” O’Malley said.
San Antonio attorney Shannon Loyd makes similar arguments on behalf of Snowden’s shop in Texas. The Hair Goals Club, which bills itself as a multi-ethic boutique that sells wigs and hair-extensions, celebrated its grand opening last November at a mid-block storefront next to a tailor shop, a block from the Humble City Cafe. Four months later, an order from Harris County made it impossible to do business.
Snowden, contacted by telephone, said she was irritated that her attorney did not tell her that she had already filed the lawsuit. She declined further comment.
Her suit says The Hartford wrongfully denied a business interruption claim without making a reasonable investigation and asks for damages of less than $75,000.
Bigger damages likely await insurers if plaintiffs win lawsuits filed by Indian casinos in Oklahoma.
The Chickasaw and Choctaw Nations on March 24 filed lawsuits in Oklahoma state court against Lloyd’s of London syndicates and several other carriers seeking declarations that the loss in business income to their casinos due to a stay-at-home order issued by the governor are covered by their “all-risk” business policies.
Attorney Michael Burrage, with Whitten Burrage in Oklahoma City, told The Oklahoman newspaper that the insurers had not specifically denied the tribe’s claims but there were denials in Louisiana and other places.
The Oceana Grill in New Orleans is likely Patient Zero for the epidemic of business-interruption litigation. The restaurant filed the first publicized lawsuit seeking a declaration that a business interruption loss was covered by insurance on March 16, filing suit against Lloyd’s syndicates.
Napa Valley, California restaurants owned by renowned chef Thomas Keller followed suit with a similar lawsuit against a unit of The Hartford on March 25.
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