Insurer faces lawsuit from hotels over denied coverage

Canadian hotels are launching a class action lawsuit after they were denied insurance coverage for business income lost due to the COVID-19 pandemic.

According to a report from The Canadian Press citing a statement of claim from law firm Lerners, Aviva Insurance (Aviva) is alleged to be in breach of contract when it denied the hotels' loss of business income coverage after the federal and provincial governments declared states of emergency, restricting their business due to COVID-19.

The lawsuit was filed on behalf of Roshan Holdings which owns and operates two hotels. The claim stated that these hotels paid premiums for the loss of business income insurance with the expectation that Aviva would act in good faith. However, the insurer notified hotel customers that the coverage applies only to outbreaks that occurred “at or within the applicable area of the insured premises”.

Lerners is therefore seeking C$150m ($112m) including loss of business income and the accountants’ fees. Each hotel has up to C$500,000 of coverage. A spokeswoman from the law firm said that losses are expected to be significant even though the specific loss for the representative plaintiff and putative class members’ losses are still being quantified.

While this class action lawsuit, which could involve hundreds of hotels, still needs to be approved by a judge, there have already been multiple other class action lawsuits filed against insurers in Canada resulting from the pandemic. The government in the Canadian state of Ontario had declared a provincial state of emergency on 17 March to help contain the spread of COVID-19 while other provinces ordered the mandatory closure of all places of non-essential business.

"Although the hotels were not completely closed, their operations were significantly restricted. The hotels could not offer food and beverage service and all of the amenities including the pool and gym were mandated to close under the closure orders due to COVID-19,” said the claim from the hotels.

In a statement, Aviva said, "Unfortunately in this instance there is no coverage for provincial wide shutdown orders as a result of a worldwide pandemic. As this matter is in litigation, it wouldn't be appropriate for us to comment further.”

Source: Asia Insurance Review

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