New Jersey Restaurant Claims Chubb Refuses to Pay Insurance Claims for COVID-19 Closure Losses

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A New Jersey restaurant claims in a proposed class action that Chubb Ltd. and Indemnity Insurance Company of North America are among a group of insurers who have wrongfully denied claims for damages stemming from COVID-19-related business closures.

According to the lawsuit, the defendants have refused to pay for the plaintiff’s covered losses incurred after the restaurant was forced to cease operations due to New Jersey Governor Phil Murphy’s executive orders issued March 16 and 21, 2020. The lawsuit claims the governor’s pandemic-related mandates ordering the closure of all non-essential businesses in New Jersey has had “catastrophic” effects on eateries such as the plaintiff’s restaurant in Summit.

The case explains that the plaintiff business’s insurance policy issued by Chubb and subsidiary Indemnity is an “all-risk” policy that includes coverage for “physical loss or damage” to the property caused by all risks except those that have been expressly excluded. A business interruption such as that experienced by the plaintiff due to government orders should fall under the policy’s business income, extra expense, additional, and civil authority coverage, according to the case.

The suit says that although the plaintiff’s policy excludes losses stemming from “any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease,” the losses in question are a result of “precautionary measures” taken by New Jersey to prevent the spread of COVID-19—not the physical presence of the virus at the plaintiff’s covered property.

According to the case, neither the defendants nor any insurer intends to cover losses stemming from the COVID-19 pandemic. In fact, the suit says, a collection of insurance industry trade groups stated in response to a letter sent by members of the U.S. House of Representatives that “[b]usiness interruption policies do not, and were not designed to, provide coverage against communicable diseases such as COVID-19.” Similarly, state departments of insurance and other industry members have advised that “COVID-19 is not an insured peril” and will not trigger business interruption coverage, according to the case.

In line with this, Chubb on April 1, 2020 posted a notice on its website in which the insurer essentially declared that loss of use or diminished property value does not qualify as “physical loss or damage” under the terms of its property insurance policies, the complaint continues.

“The presence of an infectious agent or communicable disease at a location where there is covered property generally will not mean that property has suffered ‘physical loss or damage’ under your policy,” the notice emphasized.

The plaintiff seeks an order from the court declaring that the interruption of business caused by the preventative measures of civil authorities in response to the novel coronavirus pandemic is covered by the defendants’ insurance policies. Absent such an action, the plaintiff and proposed class members will be denied “critical coverage” for which they’ve already paid, the suit says.

The lawsuit looks to represent the following class, with a proposed subclass for insured New Jersey properties:

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