A restaurant’s lawsuit says coronavirus losses covered, but insurance giant won’t pay

Posted on April 29, 2020

Miami Herald LogoBY DAVID J. NEAL

A Fort Lauderdale restaurant’s federal class action lawsuit says its comprehensive insurance coverage includes the losses it has suffered during the novel coronavirus restaurant dining shutdown, but the insurer won’t pay.

The lawsuit involves IT! italy Ristorante and Bar, 500 E. Las Olas Blvd., insurance company Westchester Surplus Lines and Westchester’s parent, insurance colossus Chubb Limited. But, as a federal class action, the result likely will ripple with waves on which businesses will surf to shore or wipeout.

“There’s a sense of urgency here,” said Steve Zack of Boies Schiller Flexner. Government is trying to do its part. The insurance industry, Chubb in particular, needs to do its part. These small businesses need them to honor their contracts. It’s not just them. If you can’t open your business, you can’t pay your employees, you can’t pay your landlord, he can’t pay his mortgage.”

Zack and Steven Marks of Podhurst Orseck filed the suit April 9 for Cafe International Holding Company, owner of IT! Italy.

Cafe International says it bought a policy from Chubb via Westchester that provided “business interruption coverage.” The suit claims, Cafe International bought extra coverage on top of that in case the the loss was “caused by the action of a civil authority prohibiting access to the restaurant.”

State and municipal edicts closed restaurants in March, thus, by the restaurant’s theory, kicking in the extra coverage. The policy doesn’t specifically mention “coronavirus,” “COVID-19” or “pandemic.”

The lawsuit argues what isn’t said cuts both ways. Since 2006, the lawsuit says, there has been boiler plate insurance policy language used to exclude damages from “any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease.”

That wasn’t in this policy, the suit says.

“Plaintiff’s policy does not contain any exclusion which would apply to allow Defendants to deny coverage for losses caused by COVID-19 and related actions of civil authorities taken in response to COVID-19,” the suit argues. “Accordingly, because the policy is an all-risk policy and does not specifically exclude the losses that Plaintiff has suffered, those losses are covered.”

A Chubb email to the Miami Herald said, “As a matter of policy Chubb does not comment on client claims or pending legal matters,” but Chubb CEO Evan Greenberg told CNBC he thought making insurers pay upon the above reasoning is “unconstitutional.”

Greenberg used that word on the theory that ruling pandemics are covered would be a change of contract because pandemics never were meant to be implied in the contract. The other things that would cause business interruption coverage to kick in are finite, he said, while pandemic losses are the opposite.

“So the only one who could really take the infinite nature, financial nature, of that is the government,” he said. “The insurance industry has $800 billion in the capital and that’s to support all the normal risks we insure, plus the catastrophe events … we may incur in one year.”