Farmers Group Faces Class Action Over Alleged Refusal to Pay Barber Shops’ COVID-19 Business Loss Claim

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Two California barber shops allege in a proposed class action that Farmers Group, Inc., Farmers Insurance Company, Inc., and Truck Insurance Exchange have “categorically denied” claims for losses stemming from business interruptions during the COVID-19 crisis.

The plaintiffs claim their Farmers commercial property insurance policy included business income, extended business income, civil authority, and extra expense coverages that were triggered when California Governor Gavin Newsom ordered all non-essential businesses to close amid the COVID-19 pandemic. The lawsuit argues that although the forced closures have been financially devastating to non-essential businesses such as the plaintiffs’ barber shops, the defendants have been categorically refused to pay “legitimate claims” for business interruption coverage under insureds’ policies.

According to the suit, the plaintiffs’ policy with Farmers purports to pay for property loss or damage that results from all risks except those expressly excluded. The case says the policy’s specific exclusions for mold and microorganisms; virus or bacteria; and fungi, wet rot, dry rot, and bacteria do not apply to the plaintiffs’ circumstance since the damage was caused by “precautionary measures” taken by the state to prevent the spread of COVID-19, and “not because coronavirus was found on or around Plaintiffs’ insured properties.”

The plaintiffs say they submitted a claim to Farmers on April 1 after being unable to use their properties for their intended purpose. The same day, however, Farmers informed the plaintiffs that it had denied their claim for business interruption losses despite failing to conduct “any inspection or review” of either the properties or documents concerning the barber shops’ commercial activities, the suit says.

The lawsuit claims the speed at which the defendants denied the plaintiffs’ claim indicates the decision was based not on a “good faith or reasonable investigation” of the barber shops, but rather on the companies’ blanket policy of denying all COVID-19-related business interruption claims. From the complaint:

The case goes on to allege that the defendants’ conduct is part of a broader scheme employed by the insurance industry to minimize exposure by denying all business interruption claims related to the COVID-19 crisis. As noted in the complaint, commercial property insurers have faced numerous lawsuits from businesses whose claims for COVID-19-related losses were denied.

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