Class Action Lawsuit Over COVID-19 Business Losses Coverage Filed Against The Cincinnati Insurance Co.

The owners of a Missouri hair salon have filed a class action lawsuit against The Cincinnati Insurance Company, over failure to provide insurance coverage for business losses caused by the COVID-19 pandemic and resulting shutdown orders issued by government officials.

The complaint (PDF) was filed in the U.S. District Court for the Western District of Missouri on April 27, by the small business Studio 417, Inc., which operates hair salons in the Springfield area.

The lawsuit seeks class action status to pursue damages for all individuals and small businesses that have been denied coverage by The Cinncinnati Insurance Company following the COVID-19 pandemic that has emerged over the past few months.

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Studio 417 indicates it paid premiums to The Cincinnati Insurance Company, which included coverage for potential business losses due to a variety of possible causes. However, the lawsuit indicates the insurance company failed to live up to its end of the contract after the salons had to suspend operations due to the pandemic and resulting state “stay home” orders.

The COVID-19 business loss coverage class action lawsuit alleges that The Cincinnati Company has refused to reimburse customers, even though it has no legal standing refuse coverage, thus violating the insurance contract.

In recent weeks a number of individual lawsuits and class action lawsuits 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.

While many insurance companies have argued the claims are not covered due to policy provisions that exclude losses due to viral outbreaks, some small business owners indicate that claims have been denied even when policies do not contain that clause. In addition, in many situations the business owners point out that their losses were not caused by viral infections or illnesses, but rather resulted from government “stay-at-home” orders, school cancelations or other actions taken to reduce the spread of the outbreak.

In this case, plaintiffs say The Cincinnati Company cannot even use the virus exemption defense, because it had no such exemption.

“Defendant did not exclude or limit coverage for losses from viruses in Plaintiff’s policies or those of the other Class members,” the lawsuit states. “The policy did not exclude pandemic coverage, communicable disease coverage or anything similar.”

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. JPML to centralize all coronavirus insurance coverage lawsuits before one judge in the Eastern District of Pennsylvania.

According to the motion, there are already about a dozen such COVID-19 business interruption insurance lawsuits filed nationwide, and it is estimated that hundreds, if not 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 not denying payments on policies they paid for.

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