Wave of Business Owners Sue Insurance Companies for Denying COVID-19-Related Business Interruption Claims

ATTENTION BUSINESS OWNERS: we are investigating possible wrongful denials of business interruption insurance claims due to COVID-19. If you would like us to review your policy, feel free to send it along.

With stories of COVID-19, the strain on global healthcare, and social distancing dominating headlines, the pandemic’s impact on the owners of small and medium sized businesses is sometimes lost in the shuffle. At the end of the day, business owners are people too. They deal with the same fears and concerns about Coronavirus as everyone else, plus the added anxiety that comes with being responsible for the livelihoods of employees and their families. In a time when many businesses are facing forced closures, a growing number of business owners have filed claims for business interruption coverage under their commercial insurance policies only to have those claims denied.

Business owners who have had their claims for business interruption coverage denied are not without options though. It is important in such instances to seek the assistance of an experienced insurance coverage and bad faith denial attorney who will help you review your policy, consider your options, and, importantly, determine if the insurance company wrongfully denied coverage. An attorney can negotiate on your behalf with the insurance company, and if necessary, file a lawsuit seeking a declaration of coverage and a judgment requiring payment under the policy.

Business interruption coverage is meant to cover expenses during a period when the business is unable to operate. These expenses can include lost revenue, rent or lease payments, relocation costs, employee wages, taxes, and loan payments. Depending on the language of the policy, business interruptions can be covered under an “all risk” commercial property policy, a separate business interruption or business income policy, or through an endorsement to an existing commercial policy (e.g. a Pandemic Event Endorsement). If you have sought coverage for a COVID-19 related business interruption and been denied, we would be happy to review your policies to determine if you have coverage.

As the number of businesses forced to shutter their stores or offices rises so does the number of lawsuits being filed by businesses alleging that they have sought and been wrongly denied coverage by their insurance companies for interruption to their business caused by COVID-19. A theatre company recently filed a lawsuit in an Indiana state court against The Cincinnati Casualty Company seeking a declaration of coverage for COVID-19 losses under an “all risk” commercial property insurance policy. The theatre company alleges that the policy included “Building and Personal Property Coverage and Business Income and Extra Expense” coverage which should have covered lost revenue when the theatre was forced to suspend its operations due to state and federal limits on large gatherings. According to the complaint, the insurance company issued a reservation of rights letter explaining that business interruption coverage required “direct physical loss or damage” to the covered property and that a “pandemic, without more, is not direct physical loss or damage[.]” In late March, Oceana Grill, a New Orleans restaurant, filed a similar complaint against Llloyd’s seeking coverage for coronavirus-related business interruptions under a similar “all risk” policy.

In another recently filed lawsuit against Lloyd’s, the owner of a chain of movie theaters in Texas alleges that certain insurance underwriters at Lloyd’s denied a business interruption claim under a special endorsement meant to cover losses caused by a pandemic event. According to the plaintiff, Lloyd’s created the “Pandemic Event Endorsement” shortly after the Ebola outbreak in 2014 and marketed the endorsement as a way to plug gaps in coverage created by exclusions insurers added in to their policies following that pandemic. The complaint alleges that Lloyd’s promised those who purchased the additional coverage that “its ‘stand alone business interruption’ insurance ‘will cover business interruption along with extra expenses with crisis management that is crucial during pandemic events.’” The plaintiff alleges that, despite paying an additional premium for the endorsement, Lloyd’s denied coverage because COVID-19 was not a named disease on the endorsement. The complaint asserts causes of action for declaratory judgment, breach of contract, breach of the duty of good faith and fair dealing, and “gross negligence and/or malice.”

In Illinois, two different lawsuits have been filed against Society Insurance, a Fon du Lac, Wisconsin-based insurance company that focuses primarily on bars, taverns, hospitality, restaurants, entertainment venues and other specialty niches. According to the complaints filed in the Northern District of Illinois federal court, the plaintiffs all purchased business interruption insurance policies but were denied coverage for COVID-19-related closures to their businesses. The plaintiffs in one suit, which includes the Billy Goat Tavern, seek to have the case certified as a class action and represent similarly situated businesses. That complaint is available here.

We are assisting a number of businesses across a wide range of industries by reviewing their policies to see whether coverage is available for business interruption losses arising out of COVID-19. If you are a business owner who is considering filing a business interruption claim or has already filed a claim and been denied, please contact us for a free consultation.

Super Lawyers named Chicago and Elmhurst business litigation and insurance dispute attorneys Peter Lubin and Patrick Austermuehle a Super Lawyer and Rising Star respectively in the Categories of Class Action, Business Litigation, and Consumer Rights Litigation. Lubin Austermuehle’s Oak Brook and Chicago shareholder oppression lawyers have over thirty-five years of experience litigating complex commercial litigation, declaratory judgment, and bad faith disputes. We handle emergency business lawsuits involving injunctions, and TROS, covenants not to compete, franchise, distributor and dealer wrongful termination and trade secret lawsuits in addition to disputes involving breaches of fiduciary duty. In every case, our goal is to resolve disputes as quickly and successfully as possible, helping business clients protect their investments and get back to business as usual. From offices near Naperville and Wheaton, we serve clients throughout Illinois and the Midwest.

If you’d like to discuss how the experienced Illinois insurance and breach of contract attorneys at Lubin Austermuehle can help, we would like to hear from you. To set up a consultation with one of our Chicago class action attorneys and Chicago business trial lawyers, please call us toll-free at (833) 306-4933 or contact us online.

 

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