Insurers Facing Federal Lawsuits

For Refuting Business Interruption Claims

The country is witnessing the most challenging times due to the COVID-19 pandemic. The economy is at a screeching halt, and people are struggling to make ends meet. Thousands of businesses are under closure, and they have now pinned their hopes of reopening on proceeds from their insurance.

Business interruption claims are insurance coverage that protects businesses against loss of income and other losses caused by any incident that interrupts routine business operations. However, many insurers are denying COVID-19 related business interruption claims.

Federal Class Action Lawsuits against Insurers

Many businesses launched complaints against insurance companies denying their business interruption policy claims. Most of the plaintiffs had made claims because they are facing economic crises or business closure due to the COVID-19.

Responding to the complaints, the law firms DiCello Levitt Gutzler, Burns Bowen Bair, The Lanier Law Firm, and Daniels & Tredennick, issued a joint release and named six insurance companies as defendants.

The Defendants

  • Aspen American Insurance
  • Society Insurance
  • Lloyd’s of London
  • Auto-Owners Insurance
  • Topa Insurance Company
  • Oregon Mutual Insurance

Plaintiffs for the Lawsuit

  • a nightclub in San Diego, CA
  • a Minnesota-based chain of bars/restaurants
  • a Madison, Wisconsin-based bakery
  • a bridal retailer located in Cleveland, OH
  • a Portland restaurant
  • a St. Paul, Minnesota-based dental practice

The three law firms that have issued the release are representing each of the plaintiffs mentioned above. In the lawsuits, the businesses claimed that they purchased the special property insurance as a protection against unforeseen, out of their control interruptions or disruptions.

The insurance policy includes income coverage. The law firms said that the insurance coverage plans of the plaintiffs either included or did not explicitly exclude income loss caused by viral infections, such as the COVID-19.

However, the insurance companies refused to comply with their contractual responsibilities for the financial/income loss the plaintiffs suffered due to the ongoing pandemic. They also refused claims for the losses caused by executive orders from the civil authorities. Insurers denied upholding any efforts to help these businesses sustain and continue their operations.

Need to Honor Insurance Agreements

Business interruption insurance coverage is an additional expense for small business owners juggling to provide for their households and employees. However, they purchase such expensive insurance policies to survive through tough times and cope with income loss due to interruption in their business.

Adam Levitt, one of the plaintiff co-counsel, said, denying business interruption claims in these challenging times is “unethical and abhorrent” on the insurer’s part. Note that most property insurance policies cover all-risk property damage.

Mark Lanier, plaintiff co-counsel, said that the insurance companies must honor their agreements. Economy, especially small businesses, will need a long time to recover and restart. The claim-denial games of the insurance companies are not only a threat for small business owners but the US economy in entirety.

The law firms representing the plaintiffs said that they would do everything in their capacity to ensure the “businesses are made whole.”

On April 14, 2020, the California Department of Insurance (CDI) also issued a press release in response to the complaints against insurance companies, brokers, agents, and other Department licensees denying business interruption claims. The notice ordered authorities to conduct a fair investigation of all claims and comply with their legal obligations.