Coronavirus Insurance Lawsuits Filed By More Than 130 Companies Denied Business Loss Coverage: Reports

Insurance companies face nearly 140 lawsuits nationwide over refusal to cover business interruption claims following COVID-19 shutdowns, making it the second-most common type of coronavirus-related lawsuit in the United States, according to a new report.

A complaint tracker published by an international firm indicates that businesses have filed 138 coronavirus insurance lawsuits in recent weeks, each raising similar allegations that companies are refusing to honor claims for business interruption coverage included in many small business insurance policies.

Individual lawsuits and class action claims have been filed by restaurant owners and other small businesses who were denied COVID-19 business interruption insurance coverage, even though they paid premiums to insure against lost business that was out of their control.

While many insurance companies have argued the claims are not covered due to policy provisions which exclude losses due to viral infections or outbreaks, small business owners indicate claims have been denied even when policies do not contain the clause, and in many situations the losses are not resulting directly from illnesses associated with COVID-19, but rather result from government “stay-at-home” orders, school cancelations or other actions taken to reduce the spread of the outbreak.

Just last week, a travel agency and a restaurant in Texas filed claims against Travelers Indemnity Company, alleging that the insurer is rejecting claims out of hand, without even investigating the circumstances. One of the lawsuits accuses Travelers of acting in bad faith, claiming it told the restaurant it did not suffer losses because it could still sell take-out orders, even though that had never been part of the restaurant’s service.

According to the complaint tracker, plaintiffs have filed 795 coronavirus-related cases since the beginning of the year. The largest number of those complaints have been filed by prisoners, more than 200 of whom say they are being treated inhumanely and are largely unprotected against COVID-19. Business lawsuits against insurers is the second most common type of coronavirus-related complaint.

With a growing number of complaints being filed in U.S. District Courts nationwide, several plaintiffs filed a motion to transfer on April 20, asking the U.S. Judicial Panel on Multidistrict Litigation to centralize all coronavirus insurance coverage lawsuits before one judge in the Eastern District of Pennsylvania.

It is estimated that thousands of similar complains will likely be filed in the coming months, as more small businesses are pushed to the brink only to find their insurance companies are denying payments on policies they paid for.

In complex product liability litigation, where a large number of claims are filed throughout the federal court system by individuals who suffered similar injuries as a result of the same or similar products or venues, it is common for the federal court system to centralize the litigation for pretrial proceedings. However, if settlements are not reached during discovery or following a series of early “bellwether” trials, each claim may later be remanded back to the U.S. District Court where it was originally filed to go before a jury.