The owner of a Fort Lauderdale restaurant has filed a class-action lawsuit against Chubb Limited, alleging that the insurer reneged on paying the business-interruption losses related to the COVID-19 pandemic.
Cafe International Holding Co. LLC, owner of IT Italy, filed the lawsuit against Chubb last month in the U.S. District Court in southern Florida. The plaintiff alleges that the firm’s insurance policy protects against loss of business income when a civil authority bans access to the restaurant, as occurred beginning in March with the coronavirus emergency.
“Under the policy, defendants promised to cover these losses and expenses, and are obligated to pay for them,” the lawsuit states. “But in blatant breach of their contractual obligations, defendants have failed to pay for these losses and expenses.”
Insurance Information Institute spokesman Michael Barry
The plaintiff also contends that Chubb failed to pay thousands of other firms with similar business-interruption policies for COVID-19 losses.
Although Chubb has not responded to the lawsuit, the Insurance Information Institute (III), an industry-funded, nonprofit educational organization, disputes the idea that insurers can step in to cover losses related to a global pandemic.
“The insurance industry stance is that for a business-interruption policy to be triggered, the business premises must incur direct physical damage,” Michael Barry, the III’s head of media relations and public affairs, told the Florida Record.
Typically, standard business-interruption policies have exclusions for viruses and bacteria, Barry said. The Cafe International lawsuit, however, contends the restaurant owner’s policy contained no exclusion that would allow a denial of coverage for its coronavirus losses.
But it remains the industry’s position that the threat of a virus does not constitute physical damage to a property, according to Barry. An III study also argues that retroactive business-interruption payouts would place a serious financial strain on insurers at a time they need reserves to pay for damage from natural disasters, such as hurricanes and tornadoes.
During natural disasters such as Superstorm Sandy, not all businesses shut down, and the risk can be spread out geographically, he said.
“Here you have an instance of all 50 states where businesses closed at the same time,” Barry said.
Only the federal government has to financial resources to cover the economic fallout from a pandemic, he said
“Restaurateurs are aligned on the need for the federal government to support these struggling businesses,” Barry said.