Six small U.S. businesses are hitting insurance companies with class action lawsuits and seeking compensation for denied business interruption claims during the COVID-19 pandemic.
Here is everything you need to know so far about the litigation.
How is COVID-19 Causing Business Interruption?
Businesses everywhere have already felt the impact of the COVID-19 crisis. In a survey of more than 1,500 small business owners, approximately 51 percent said their businesses will only be able to continue operating for up to three months if current conditions persist. Only 13 percent of small business owners are confident about their contingency plans to meet the needs of their businesses moving forward.
Many business owners assumed their business interruption insurance policies would kick in or be an option, but many who have filed claims due to COVID-19 have been denied. Many insurers are asserting these policies only cover physical loss or damage to property that causes a business to close. For instance, a hurricane might be covered by the policy, but not a pandemic. With no direct physical loss to property, some insurance companies are denying any kind of coverage for business continuity insurance claims in wake of the pandemic.
The Class Action Lawsuits
U.S. businesses devastated by COVID-19 have filed federal class action lawsuits against six insurance companies. The insurance companies have allegedly denied policy claims the businesses had previously purchased to protect against business interruptions.
Each of the class actions claim the business involved purchased property insurance coverage to protect against interruptions or disruptions of business that are outside of the business’s control. Also included in the policies is business income coverage, which is intended to pay for losses due to necessary suspension of operations. In each of the lawsuits, these policies either included or did not expressly or effectively exclude losses caused by viruses, such as COVID-19, that could potentially trigger widespread business closures.
According to President Donald Trump, unless the policy specifically excludes pandemics, insurers should have to pay.
Adam Levitt of DiCello Levitt Gutzler LLC told Law360, “Businesses buy these policies and pay high premiums for these policies, for specifically this precise situation. It is unfortunate that after these policyholders have held up their end of their bargain with their insurers, that their insurers are unwilling to do the same.”
On a uniform basis, the six insurers have refused to sustain their contractual responsibilities for losses suffered by businesses during the COVID-19 crisis. This includes losses caused by authorities’ executive orders as well as efforts to prevent further property damage or to minimize the suspension of business and continue operations.
Advocates for insurance companies and defense attorneys say insurers are typically not liable for business interruptions caused by closures ordered as a preventive measure to stop the spread of contamination. They argue that coverage is triggered only when there is physical damage to the property, and even if insurers did cover losses caused by viruses, “the amount of coverage available would likely be minimal at best.”
The six business interruption cases include:
- Christie Jo Berkseth-Rojas DDS v. Aspen American Insurance Company; U.S. District Court for the Northern District of Texas
- Bridal Expressions LLC v. Owners Insurance Company; U.S. District Court for the Northern District of Ohio
- 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
- Dakota Ventures, LLC d/b/a/Kokopelli Grill v. Oregon Mutual Insurance Co.; U.S. District Court for the District of Oregon
- Caribe Restaurant & Nightclub, Inc. v. Topa Insurance Company; U.S. District Court for the Central District of California
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