PHILADELPHIA – A federal judge has ordered that class action litigation brought by a New York-based bed and breakfast against the Lloyd’s of London insurance company and its underwriter for failing to provide it and fellow class members with business interruption coverage during the coronavirus pandemic, will be stayed.
Fire Island Retreat (individually and on behalf of all others similarly situated) of Fire Island Pines, N.Y. first filed suit on May 15 in the U.S. District Court for the Eastern District of Pennsylvania versus Lloyd’s Of London and underwriter Brit Global Specialty USA, Inc., of Chicago, Ill.
Lloyd’s of London had provided the plaintiff with an insurance policy covering the dates of Aug. 14, 2019 to Aug. 14, 2020, which according to the lawsuit, included coverage for certain losses under the concept of business interruption coverage.
After the pandemic resulted in executive orders from New York Gov. Andrew Cuomo resulting in the shutdown of Fire Island Retreat and many other businesses, the suit states the plaintiff suffered significant losses during what is normally its busiest time of year and therefore, submitted a claim declaring such to the defendants.
Despite having a policy which did not have virus or pandemic exclusions, the plaintiff asserted its insurance claim was still rejected by the defendants.
“Plaintiff specifically sought and paid premiums to defendants for coverage to ensure the survival of the business due to business closure ordered by the civil authority. The reasonable expectation of plaintiff was that the business interruption policy included coverage when a civil authority forced closure of businesses for an issue of public safety,” the suit stated.
“Plaintiff filed a notice of loss report in March 2020 seeking coverage for lost business income. As of this filing, defendants have not paid plaintiff for his losses nor have defendants notified plaintiff if, and when, they will pay his claim for actual loss of business. It was plaintiff’s reasonable expectation that if civil authorities forced closure of his business, the loss of income from such civil authority action would be covered under the policy.”
The plaintiff said 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
Counsel for the plaintiff opposed the defendant’s request for pre-motion conferences as to the latter party’s desire to transfer venue and dismiss the case, by asking that decisions on such matters be delayed.
“As an initial matter, this Court may wish to consider delaying its ruling on this issue pending a ruling by the Judicial Panel on Multidistrict Litigation (JPML). Two days after defendant filed its request for a pre-motion conference, the JPML issued an order to show cause why this action, along with 13 others based on Lloyd’s failure to pay for business losses resulting from COVID-19 and related civil authority orders, should not be transferred to a single district for consolidated or coordinated pretrial proceedings under 28 U.S.C. Section 1407,” counsel for the bed and breakfast said.
“This followed the JPML’s rejection of requests for a single MDL covering all cases against all insurers, and its suggestion that it would be better to form four separate MDLs against the four largest groups of insurers.”
On Aug. 21, U.S. District Court for the Eastern District of Pennsylvania Judge Mitchell S. Goldberg ordered the case proceedings stayed, pending a forthcoming decision from another federal court on COVID-19-based proceedings against Lloyd’s of London.
“Upon consideration of defendant’s letter request for a Rule 12(b) conference and plaintiffs’ response, it is hereby ordered that no conference shall be held at this time and that this case shall be stayed pending a ruling by the Judicial Panel on Multidistrict Litigation on transfer of all COVID-19 cases against defendant to a single district for consolidated or coordinated pretrial proceedings,” Goldberg said.
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, and for a count of breach of contract, compensatory damages resulting from defendants’ breaches of plaintiff’s policy and other class members’ policies and seek all other relief deemed appropriate by this Court, including attorneys’ fees and costs, pre- and post-judgment interest and such further relief as may be appropriate, plus a trial by jury.
The plaintiff is represented by Daniel N. Gallucci and Dianne M. Nast of Nastlaw in Philadelphia.
The defendant is represented by David E. Walker and Fred L. Alvarez of Walker Wilcox Matousek in Chicago, Ill., Gregory L. Mast and Paul L. Fields Jr. of Fields Howell in Atlanta, Ga., plus Michael J. Smith and Marc R. Kamin of Stewart Smith, in West Conshohocken.
U.S. District Court for the Eastern District of Pennsylvania case 2:20-cv-02312
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com