By Nathan Hale
Law360 (April 20, 2020, 6:11 PM EDT) — Chubb Ltd. was accused Monday of wrongly denying business interruption claims arising from closures caused by the COVID-19 pandemic, in a shuttered South Florida restaurant’s proposed class action filed in federal court.
The owner of IT! Italy Ristorante Café & Bar in downtown Fort Lauderdale, which is represented by litigation heavyweights Boies Schiller Flexner LLP and Podhurst Orseck PA, called the denial of its claim by the insurance giant and a subsidiary a “blatant breach of their contractual obligations,” and said it believes they have failed to pay for similar losses and expenses for thousands of other businesses.
“With our economy paralyzed due to the COVID-19 outbreak, businesses across the country are relying on their all-risk insurance policies to cover everything from rent and mortgage payments, to payroll and utility costs,” Steven Marks, managing partner at Miami-based Podhurst Orseck said in a statement. “Chubb’s decision to refuse these claims will only add insult to injury for business owners who are already reeling from the economic shutdown.”
The kind of “all-risk” insurance policy issued to plaintiff Café International Holding Company LLC by Westchester Surplus Lines Insurance Co. provides unconditional coverage for all risks of loss except those that are specifically omitted, and the policy at issue here contains no applicable exclusion that would allow the company to deny the claim due to the coronavirus outbreak, Marks added.
Café International says in its 26-page complaint that it was forced to suspend operations beginning in late March as a result of the COVID-19 pandemic, citing multiple executive orders issued by Florida Gov. Ron DeSantis and Broward County.
The company claims the losses it has suffered in business income are covered by the business interruption coverage provided in its policy, which covers the period from Nov. 29, 2019 to Nov. 29, 2020. It also claims Chubb should pay out under “extra expense” coverage in the policy for expenses it has incurred to minimize the suspension of its business and “civil authority” coverage for the loss of business income caused by the government prohibiting access to the restaurant.
The Insurance Services Office, a company that drafts standard policy language for use in insurance contracts, drafted a new endorsement in 2006 that states that an insurer “will not pay for loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease,” according to the complaint. But while other insurers have incorporated this language in their policies, Chubb and Westchester chose not to put it in the policy at issue, Café International said.
The suit alleges that Chubb and Westchester have failed to pay possibly thousands of other policyholders for similar claims arising from the pandemic, citing an announcement it said Chubb’s chief executive officer made on national television that the insurer intends to take the position that its standard property insurance policies do not cover claims related to COVID-19 and that it would not pay business interruption claims arising from the disease.
“Chubb is the world’s largest publicly traded property and casualty insurer and when they said they weren’t going to honor the provisions of their contracts, we had no choice but to sue,” Steve Zack, administrative partner of the Miami office of Boies Schiller Flexner, said in a statement. “There are many hundreds, if not thousands, of policies like this one where there is no exclusion for viruses — yet Chubb refuses to pay. The future of these businesses is on everyone’s mind. We want them to survive, and succeed, for the owners and their employees.”
Café International seeks to represent three nationwide classes: a “business income coverage class,” consisting of policyholders who did not receive coverage for losses related to business suspensions cause by COVID-19; a “civil authority coverage class,” for policyholders denied coverage for business income losses or extra expenses caused by a civil authority’s action; and an “extra expense coverage class,” including policyholders denied coverage for expenses they incurred trying to minimize the suspension of business caused by either the pandemic or a civil authority’s response to it.
Representatives for Café International’s counsel said they had no further comment Monday. A representative for Chubb said the company does not comment on pending litigation.
Café International is represented by Stephen N. Zack, Bruce Weil, James Lee, Marshall Dore Louis, David Boies, Nick Gravante and Alex Boies of Boies of Schiller Flexner LLP and Steven C. Marks, Aaron S. Podhurst, Lea P. Bucciero, Matthew P. Weinshall and Kristina M. Infante of Podhurst Orseck PA.
Counsel information for the defendants was not immediately available.
The case is Café International Holding Company LLC v. Chubb Ltd. et al., case number 1:20-cv-21641, in the U.S. District Court for the Southern District of Florida.