Massachusetts legislature votes down bill that would have provided retroactive insurance coverage for business losses from the pandemic

 

As I discussed here, the Massachusetts legislature had been considering a bill creating retroactive insurance coverage for business income losses due to the pandemic, with losses adjusted by insurers and paid by the commonwealth.  The Massachusetts Senate has voted against the bill.  

 

 

Kenmore Army Navy Store added to list of businesses seeking business interruption coverage for Covid-19 losses

 

The Kenmore Army Navy Store (which is located in Downtown Crossing, several MBTA stops away from Kenmore), has sued Travelers Casualty Insurance Company of America in the United States District Court for the District of Massachusetts.  Like so many other businesses, the Army Navy store seeks business interruption coverage for losses from the coronavirus pandemic.  

The store alleges that the policy Travelers issued has the usual coverage for "direct physical loss."  It alleges that the direct physical loss from the pandemic is "the property being damaged, access to the property being denied, customers being prevented from physically occupying the property, the property being physically uninhabitable by customers, the function of the property being nearly eliminated or destroyed, and/or a suspension of business operations occurring at the property." 

The store also alleges that the policy has no applicable exclusions -- meaning, presumably, that the policy does not contain a virus exclusion.  If that's correct, that's one legal hurdle the store does not have to jump over.

The store alleges breach of contract and, in what seems to me to be a bit of a stretch, breach of the covenant of good faith and fair dealing and of Mass. Gen. Laws ch, 93A.    

Cheers bar joins the fray -- files lawsuit for business interruption coverage for Covid-19 losses

Some (actually not so) important background: when the TV show Cheers was popular, a bar opened in Boston which was named Cheers to attract tourists who were fans of the show.  Natives knew that the "legitimate" Cheers bar was the Bull & Finch Pub, on Beacon Hill -- because the exterior of the TV show's bar was shot there.  Back in the day, it was a pretty good bar, although nobody knew my name when I went there.  Eventually the fake Cheers bar also took over the Bull & Finch and renamed it Cheers. 

Yesterday Hampshire House Corporation, the owner of both Cheers bars as well as a couple of other restaurants, filed a lawsuit in the United States District Court for the District of Massachusetts against Fireman's Fund Insurance Company, Associated Indemnity Corporation, and Allianz Global Risks United States Insurance Company, alleging that the insurers have wrongfully denied coverage for business interruption claims caused by -- not the Covid-19 pandemic, but the emergency orders limiting the operation of restaurants during the pandemic.  Presumably that is because the policies have a virus exclusion that would apply to pandemic losses. 

According to the complaint, the emergency orders "were not a foregone conclusion or obvious consequence of the Covid-19 pandemic, as evidenced by the great variance between states and localities as to the types and extent of restrictions placed on business and public activities." 

The complaint alleges that the emergency orders caused Hampshire House to lose the ability to provide restaurant, alcohol, and retail sales, prevented its customers from physically occupying the premises, and caused the properties to be physically uninhabitable.  According to the complaint, those losses constituted "physical loss of and damage to the insured properties for regular business operations."  Since the policies cover physical loss and damage, the business losses from the emergency orders are covered losses. 

Hampshire House takes issue with the insurers' across-the-board denial of all Covid-19 business interruption claims, alleging that the insurers have a duty to investigate the different circumstances that apply to each claim. 

Lawsuits filed over denial of claims for business interruption losses as a result of coronavirus pandemic

I am aware of two Massachusetts cases to date against insurers alleging wrongful denials of claims for business interruption losses as a result of the coronavirus pandemic.  Both have been filed in the United States District Court for the District of Massachusetts.

In the amended complaint in the first lawsuit, Legal Sea Foods, LLC v. Strathmore Ins. Co., restaurant chain Legal Sea Foods alleges that its policy issued by Strathmore Insurance Company did not have a virus exclusion -- putting Legal's a step ahead of most policyholders.

Legal's alleges that the coronavirus caused direct physical loss or damage to its insured properties because the virus can be spread through contact with surfaces such as metal and glass used in preparing and serving the restaurant meals.  It also alleges that it is eligible for coverage for losses caused by civil authority.

According to the complaint, Strathmore denied coverage on the grounds that there was no direct physical loss or damage and that the claim was excluded by exclusions for losses caused by ordinance or law or by "acts or decisions, including the failure to act or decide, by any person, group, organization, or governmental body."  Legal's alleged that both exclusions are inapplicable.

The second lawsuit, Rinnigade Art Works v. The Hartford Financial Services, is a class action suit.  The named plaintiff, Rinnigade Art Works, is a graphic design and screen printing business.  Rinnigade alleges that its policy does not contain any applicable exclusions.  The complaint does not specifically discuss whether the policy contains a virus exclusion.

Like in Legal Sea Foods, Rinnigade alleges that it is entitled to coverage for business interruption losses under the policy because the coronavirus caused direct physical loss or damage and that that the state-ordered closings created a loss caused by civil authority.

Class action lawsuit filed over insurer's denial of claim for trip insurance on ground that trip cancellation due to coronavirus does not come within definition of quarantined

A class action lawsuit against a travel insurance company was filed yesterday in the United States District Court for the District of Massachusetts, seeking reimbursement for money paid for a school trip canceled due to the coronavirus pandemic.

In Corrigan v. EF Education Tours, Inc., et al, Amy Corrigan alleges that in October 2019 she enrolled her daughter, an 8th grader, in a school trip to Spain that was scheduled for April 2020.  She paid in full over $4,000 for the trip, which was coordinated by EF Education Tours and related organizations.

In November 2019, Corrigan purchased travel insurance marketed by EF and apparently written by United States Fire Insurance Company (USFIC).  The coverage  included reimbursement of trip costs if the student was prevented from traveling because she was "quarantined."  According to the complaint "quarantined" was not defined by the policy.

On March 12, 2020, EF announced that it was postponing all tours scheduled for April because of the coronavirus pandemic.  As we know, later that month the Massachusetts governor issued an executive order restricting public movement of non-essential personnel and banning gatherings of ten or more people.  He subsequently closed all public schools through the end of the school year. On March 31, 2020, the United States Department of State advised US citizens to avoid all international travel due to the pandemic.

Corrigan sought reimbursement from USFIC for the funds she had paid for the trip.  USFIC denied the claim, stating that trip cancellation due to the state quarantine and the threat of COVID-19 did not come within the coverages of the policy.

Corrigan's class action complaint alleges breach of contract, breach of the duty of good faith and fair dealing, unjust enrichment, and conversion.

This lawsuit is at the very beginning stages.  I expect to see many similar suits filed against trip insurers, summer camp insurers, and the like.  But I do note that if Corrigan's allegations are correct, her policy differs from others that I have seen that do in fact provide a definition of "quarantined."  In insurance coverage disputes, it is (almost always) the terms of the specific policy that will control the outcome.

Insurance coverage for loss of income from business interruptions due to coronavirus

Last time I posted about coronavirus liability insurance issues, a little more than a month and a lifetime ago, I had no idea that I would be writing this post from my home office, taking my temperature every few hours because I need to go three days with  no fever before I can stop self-quarantining away from my kids.  I am grateful for how lucky I have been: that my kids are old enough that they've been able to handle little supervision beyond my pestering them by text; that I did not get sicker; that friends and acquaintances and even strangers have helped my family out in all kinds of ways, from deliveries of toilet paper to making masks for us; and that I have a law practice will survive my not working for a couple of weeks.

Many businesses are worried that they will not survive.  One of the questions for them is whether they can recoup their coronavirus losses from their general liability insurance.  These are the major issues that arise from that question: 

·       Does the business interruption insurance provide coverage for loss of income from coronavirus?  

As with every insurance question, the first place to look is the language of the policy. 

Most policies provide business interruption coverage in the case of "direct physical loss or damage" to the insured property (such as a fire loss).  

There will no doubt be litigation over whether the coronavirus itself is damage to the property, at least where there were known cases of coronavirus at the business which caused it to shut or lose revenue.  

Many policies have an exclusion for losses due to viruses or bacteria.  The courts will have to address whether a “pandemic” comes within that exclusion  

Many policies also provide business interruption coverage if the losses are caused by “civil authority,” where access to the business is prohibited by an act of government.  (For example, after the Boston Marathon bombings, the government shut down businesses near the bomb site.)  Such losses do not require direct physical loss or damage to the business property, but are generally limited in scope to a few weeks.  

·       Is there any chance that insurance will provide coverage even if coverage seems to be excluded by the language of the policy?

The Massachusetts legislature is considering a bill under which insurers would pay business interruption losses from coronavirus up to the policy limit for small businesses.  The insurers would then by reimbursed by the state.  There’s a good summary of the bill here.  

·       What do I do if my insurer denies my business interruption claim?

Don’t give up without consulting with an attorney.  Insurers may reflexively deny claims.  You may have a policy that provides coverage, or a court decision may come down in the future interpreting your policy as providing coverage.  You want to make sure you don’t lose any rights. 

·       What do I do in my insurer says that there is coverage for my business interruption claim?

You should consider hiring a public adjuster to help you make sure you are submitting the full value of your claim.  Public adjusters are non-attorneys who advocate for policyholders on the amount of loss, almost always on a contingency fee.  

·       Upcoming Boston Bar Association webinar

The Insurance and Reinsurance Committee of the Boston Bar Association will be holding a webinar on these issues on Friday April 17, 2020 from noon to 1 PM.  (I am one of the chairs of this committee but the credit for putting the program together goes to my co-chair Sara Perkins Jones as well as to Nathan Cole.)  You do not need to be a member of the BBA to participate in this webinar.  

Summer camp insurance and coronavirus

I received an email from a sleepaway camp where I'm considering sending my younger daughter this summer.  The camp advised families to strongly consider purchasing camp insurance because of the potential impact of coronavirus.

I took a look at the policy being offered for that camp and another one my daughter will attend.  Although they vary in some of the details, the pertinent coverages are the same.  The insurer will reimburse me for camp fees if:

1)  My daughter cannot attend camp because she is sick.
2)  My daughter cannot attend camp because she is personally quarantined.

The policies do not provide for a return of fees if the camps are closed because of coronavirus.

I have reached out to a couple of camp directors to ask whether fees will be returned by the camp itself if camp is cancelled.  The response I'm getting is that they have never had to deal with a situation like this before and they are looking into it.

Some thoughts and takeaways:

1)   Sleepaway camp is the best. Attending and working at them were bright spots in my life, and my younger daughter has loved hers as well.  (My older daughter . . .  let's just say every camp is not right for every kid.)

2)  Before deciding on whether to purchase camp insurance for your child, read the policy that is offered.  If it's like the ones that I have seen, your calculation should not be based on how likely you think that it is that the camp will close.  It should be based on how likely you think it is that the camp will remain open but your child will not be able to attend because he or she is personally sick or quarantined.

3)  I'm not trying to join in the coronavirus fear-mongering.  Whether or not camps close or stay open may well have more to do with the perception of the dangers of coronavirus than the actuality of how dangerous it is.

4)  Obligatory reminder: wash your hands.