A group of Chicago restaurants, hospitality groups, and movie theaters has joined the growing number of hospitality organizations that are suing their insurance providers for wrongful denial of interruption insurance claims. The plaintiffs, led by Big Onion Tavern Group LLC, include 1,500 furloughed and laid off employees from local restaurants and theaters like McBride’s Pubs and Happy Campers Pizza. They are suing Society Insurance for wrongful denial of claims after their restaurants were forced to close due to government-sanctioned lockdown procedures.
Although many insurance companies include pandemic exclusions in their business interruption insurance policies, King and Spalding — the law firm representing these clients — claims that Society Insurance has no such provision in their insurance policy.
"If Society Insurance had wanted to exclude pandemic-related losses under the plaintiffs' policies — as many other insurers have done in other policies — it easily could have attempted to do so on the front-end with an express exclusion," the companies said in the filed lawsuit. "Instead, Society Insurance waited until after it collected plaintiffs' premiums, and after a pandemic and the resulting closure orders caused catastrophic business losses to plaintiffs, to try to limit its exposure on the backend through its erroneous assertion that the presence of the coronavirus is not 'physical loss' and therefore is not a covered cause of loss under its policies."
Society Insurance says, however, that in order to make a business interruption claim, there has to be evidence of physical loss or damage, and a pandemic lockdown does not meet this requirement.
“Our complaint cites the Illinois legal authority to show that the physical damage element of the policy coverage is met in coronavirus cases,” Chris O’Malley, a lawyer on the case said.
For example, since the virus can thrive on hard surfaces for weeks — like on counters, kitchen equipment, and restaurant furniture — and could ostensibly be contaminated, this could be considered physical damage.
The lawsuit is seeking declaratory judgment that “the losses incurred as a result of the mandated interruption of their businesses are covered losses under their policies, damages for breach of contract, and penalties and costs for bad faith insurance practices.”
The plaintiffs are arguing “bad faith” against Society Insurance in this case because many of the restaurants allegedly received preliminary denials of insurance claims before even filing through Society Insurance’s own agents, and as part of its plan to discourage claim filings and in direct violation of Illinois law.
“As a small, family-owned and operated business, we depend on our insurance companies to help us in desperate times of need,” Tracy Stary, owner of three McBride’s Pubs in Chicago’s suburbs, said in a statement. “After years of paying high premiums for this coverage, our claims were denied even before being submitted. We were simply dismissed. It is heartbreaking to sit back and watch our employees and business suffer through no fault of our own and with no end in sight.”
These latest lawsuits follow in the footsteps of other high-profile claims against insurance companies, including a lawsuit filed by the Thomas Keller Restaurant Group over a coronavirus business interruption claim for his restaurants.
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