Restaurant sues insurer, brokers over COVID-19 coverage

A Kansas City, Missouri, barbecue restaurant seeking coverage for coronavirus-related losses filed suit against its insurer, retail broker and wholesaler on Tuesday.

In the suit, Ja-Del Inc. v. Zurich American Insurance Co., Lovell Sagebrush Insurance Group Inc. and R-T Specialty LLC, filed in state court in Kansas City, Ja-Del, which operates Jack Stack Barbecue Restaurants, says it has seen a substantial loss in income “and direct physical losses” since local authorities in Missouri ordered businesses to shut down last month in an attempt to limit the spread of COVID-19.

According to the complaint, Ja-Del filed a business interruption claim and received a claim denial letter from Zurich. “The Denial Letter lists the coverage language from the Business Income Coverage Form section of the Policy, in part. The Denial Letter, however, then lists a ‘Microorganism Exclusion’ from an entirely different section of the policy, implying that it applies to the Business Income Coverage Form, when, in fact, it does not,” the lawsuit states.

The lawsuit also alleges negligence by retail broker Lovell Sagebrush and wholesaler R-T Specialty LLC, a unit of Ryan Specialty Group LLC. The brokers breached their duty to the policyholder “by communicating inaccurate information as to what the Policy covered and/or not procuring a policy that fully covered Plaintiff’s business income losses,” the suit says.

In addition, the brokers “made representations to Plaintiff that the Policy covered business income losses, yet, Zurich has denied Plaintiff’s claim,” court papers say. Zurich, Lovell Sagebrush and R-T Specialty could not immediately be reached for comment.

The suit is one of dozens of lawsuits filed by restaurants and other service industry companies across the country seeking business interruption coverage following government-mandated closures. Over the past two weeks, companies in other sectors, such as manufacturing and health care, and a Jewish human rights organization have also sued their insurers seeking coverage.

Insurers and insurance groups generally argue that most policies exclude coverage for virus-related losses and that the policyholders have not suffered physical damage to their properties, which is required to trigger coverage for lockdown losses.

Source: Business Insurance