PHILADELPHIA – Underwriters from the Lloyd’s of London insurance company are looking to shut down class action litigation brought by the Independence Beer Garden in Philadelphia, saying policy exclusions precluded the plaintiff from receiving its business interruption coverage during the coronavirus pandemic.
Independence Restaurant Group, LLC (doing business as “Independence Beer Garden”) of Philadelphia first filed suit on May 20 against the London-based insurer in the U.S. District Court for the Eastern District of Pennsylvania.
Lloyd’s of London had provided the plaintiff with a one-year insurance policy covering the dates of Aug. 14, 2019 to Aug. 14, 2020, which according to the lawsuit, included coverage for, among other things, the building, personal property and business income with extra expense and rental income,
After the pandemic resulted in executive orders from Pennsylvania Gov. Tom Wolf declaring that “non-life sustaining” businesses would be shut down, the suit states the plaintiff suffered significant losses and therefore, submitted a claim declaring such to the defendant.
Despite having an “all-risk” policy which did not have virus or pandemic exclusions, the plaintiff assert their insurance claim was still rejected by Lloyd’s.
“Plaintiff timely submitted a claim for loss of business income and related losses under the policy arising from the COVID-19 pandemic and civil authority shutdowns of businesses in the Commonwealth of Pennsylvania. After more than 30 days, Lloyd’s has failed to provide coverage, and has communicated its intention to deny any claims submitted by plaintiff and class members for losses arising from the COVID-19 pandemic or associated civil authority shutdowns,” the suit states.
“On information and belief, Lloyd’s position is that its insurance policies do not provide coverage for business income losses based upon the allegation that there is no physical loss or damage to the plaintiff’s property. Plaintiff also believes that Lloyd’s will assert that closure for civil authority coverage requires physical damage to another property.”
The plaintiff says this same denial of coverage has taken place with other clients of Lloyd’s in Pennsylvania, numbering in the hundreds, thereby making the certification of the case as a class action appropriate.
UPDATE
On July 10, the underwriters at Lloyd’s filed a motion to dismiss the claim, asserting the policy in questions states there must be physical damage to a business for such interruption coverage to be activated, in addition to the policy’s exclusions for damages connected to microorganisms and pollution which are harmful to human health.
“The plain and unambiguous language of the policy requires the business income loss at issue to be the direct result of physical loss of or damage to the property. Pennsylvania law places the initial burden on an insured seeking to recover under an all-risk policy of ‘proving facts that bring its claim within the policy’s affirmative grant of coverage,” the answer reads, in part.
“Here, plaintiff makes conclusory allegations that it has suffered direct physical damage, but the complaint is devoid of any mention of what physical damaged occurred, how the physical damaged occurred, when the physical damage occurred, and what needs to be repaired, replaced, or rebuilt. Accordingly, none of plaintiff’s allegations, even if taken as true, state a plausible claim that plaintiff has suffered a ‘direct physical loss or damage’ as required to trigger coverage under the policy.”
Additionally, Lloyd’s argued that policy exclusions for microorganisms and health-harming pollutants should preclude activation of the plaintiff’s insurance coverage, believing that COVID-19 qualifies under such exclusions.
“This policy does not insure any loss, damage, claim, cost, expense or other sum directly or indirectly arising out of or relating to: Mold, mildew, fungus, spores or other micro-organisms of any type, nature, or description, including but not limited to any substance whose presence poses an actual or potential threat to human health,” per the policy’s language on microorganisms.
“This exclusion applies regardless whether there is (I) any physical loss or damage to insured property; (II) any insured peril or cause, whether or not contributing concurrently or in any sequence; (III) any loss of use, occupancy, or functionality; or (IV) any action required, including but not limited to repair, replacement, removal, cleanup, abatement, disposal, relocation, or steps taken to address medical or legal concerns.”
Meanwhile, the plaintiff is seeking a declaratory judgment saying the pandemic and related shutdown orders activate business interruption coverage for it and other members of the class, such other and further relief as the Court may deem appropriate and a trial by jury.
The plaintiff is represented by Daniel J. Mann, Edward S. Goldis, Andrew Kevin Mitnick, Bethany R. Nikitenko and Alan Feldman of Feldman Shepherd Wohlgelernter Tanner Weinstock & Dodig, James A. Francis and John Soumilas of Francis Mailman Soumilas, all in Philadelphia.
The defendant is represented by Gregory L. Mast and Paul L. Fields Jr. of Fields Howell in Atlanta, David E. Walker and Fred L. Alvarez of Walker Wilcox Matousek in Chicago, and Michael J. Smith of Stewart Smith, in West Conshohocken.
U.S. District Court for the Eastern District of Pennsylvania case 2:20-cv-02365
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com