Insurance companies across the country are being hit with lawsuits for allegedly denying claims from businesses who are losing money from loss of business due to stay-at-home orders.
As the coronavirus pandemic continues, more and more insurers are being hit with lawsuits for allegedly denying claims caused by the virus hysteria. A wig store near Houston and a handful of Chicago businesses are only the latest litigants filing business interruption claims against insurance companies like Twin City Fire Insurance Co. and Society Insurance.
One of the plaintiffs, Barbara Lane Snowden, owns the Hair Goals Club and decided to file a lawsuit against Twin City Fire Insurance Co. last week. According to her, the “insurer denied a business-interruption claim after Harris County issued a stay-at-home order that effectively shut down her small wig shop on Main Street in downtown Humble, Texas.”
In Chicago, several pubs, restaurants, and movie theaters “pooled their resources to file suit against Society Insurance for denying their business-interruption lawsuits.” Big Onion Tavern Group, McBride’s Pub, Happy Camper Pizzeria, and the New 400 Theaters Group are among the plaintiffs being represented by Attorney Christopher J. O’Malley. When commenting on the suit, he said “one of his clients received notice that his claim was denied even before he filed it,” and added, “the business owner’s insurance agent filed the claim on his customer’s behalf and Society called the policyholder directly.” O’Malley also noted that Society Insurance specializes in writing premiums for entertainment businesses. He said, “although none of the Society policies excluded coverage for a virus or pandemic, the plaintiffs — some of whom are mutual friends and acquaintances — quickly learned that the carrier was not going to pay coronavirus claims.”
Why aren’t carriers like Society Insurance paying the claims? Well, according to O’Malley, the “insurance industry has made it clear through various blog posts that carriers do not believe that civil orders to prevent possible contamination constitute a physical loss that would trigger business-income claims.” The CEO of Society Insurance also issued a memorandum to agency partners that said, under Illinois law, “the policies would likely not cover such stoppages.”
O’Malley also said, “the fact that insurers exclude viruses and pandemics from coverage demonstrates the point that coronavirus can cause a covered physical loss. Otherwise, why exclude it?” He added, “We don’t think these insurers are honoring their obligations to make a good-faith inquiry and a factual determination before denying these.”
Shannon Loyd, an attorney in San Antonio, made similar arguments when defending Snowden’s shop. According to her, the Hair Goals Club “bills itself as a multi-ethnic boutique that sells wigs and hair extensions.” It opened its doors for businesses last November. Now, with stay-at-home orders in effect, she’s unable to do business. Her lawsuit claims the insurance company “denied a business interruption claim without making a reasonable investigation and asks for damages of less than $75,000.”