A California music venue alleges in a proposed class action that First Mercury Insurance Company has wrongfully denied its claim for business interruption losses sustained due to government closure mandates during the COVID-19 pandemic.
According to the 18-page lawsuit out of California, the San Francisco Bay-area venue was forced to shut its doors after Governor Gavin Newsom issued a series of mid-March executive orders that required bars and music venues to cease providing in-person services. The plaintiff business claims that although its First Mercury commercial liability and property insurance policy purported to provide business income, extra expense, and civil authority coverage, the defendant denied its claim “without any investigation.”
In essence, the suit says, First Mercury took the position that the plaintiff’s losses were not covered because the insured property did not suffer “direct physical loss or damage.” The insurer further argued that the plaintiff’s claim “does not arise out of action of civil authority which prevents access to the Premises due to nearby property damage,” and noted that losses “caused by or resulting from any virus” are excluded from coverage under the policy, the complaint continues.
According to the suit, First Mercury’s denial was based on an “unreasonable” reading of the plaintiff’s policy that “gets insurance law exactly backwards” by narrowly interpreting coverage language and broadly applying exclusions.
“First Mercury’s denial is contrary to the terms and conditions of the policy and applicable law, which gives effect to plain language, construes ambiguity in favor of coverage, and narrowly construes exclusions, the applicability of which insurers have the burden of proving,” the complaint argues.
Further, the suit alleges that First Mercury “swiftly denied” the plaintiff’s claim in what appeared to be a form letter sent in response to all business interruption claims stemming from California’s COVID-19-related government mandates.
The plaintiff suspects that First Mercury has denied California music venues’ claims based on the same “cursory” reasons and flawed policy readings “with little or no investigation and without due regard for the interests of insureds.”
The case, which adds to a growinglist of lawsuits filed against commercial property insurers amid the COVID-19 crisis, looks to represent the following class:
“All music venues in California that purchased comprehensive business insurance coverage from Defendant which includes coverage for business interruption, filed a claim for lost business income following California’s Stay at Home order, and were denied coverage by Defendant.”
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