The case detailed on this page was dismissed in July 2021 after a federal judge found that the plaintiff’s business losses did not constitute “direct physical loss of or damage to” covered property.
U.S. District Judge Barbara J. Rothstein noted in a July 1 order that she had recently dismissed 10 similar cases that had been consolidated before the plaintiff’s case was filed. In those matters, the judge held that the insurance policies at issue covered only physical loss or damage to covered properties.
Likewise, the provisions in the plaintiff’s insurance policy “all require coverage to be triggered by direct physical loss or damage to covered property (or nearby property),” Judge Rothstein wrote, adhering to her previous ruling. Because the hair salon or nearby property did not experience physical damage due to the effects of the pandemic, insurance coverage was not triggered, according to the order.
The judge added that even if the plaintiff could establish coverage, a virus exclusion in the hair salon’s insurance policy would bar claims for losses sustained as a result of the COVID-19 virus.
The lawsuit has been dismissed with prejudice, meaning the salon cannot re-file its claims.
A proposed class action claims ACE Property and Casualty Insurance Company has refused to pay for business losses sustained as a result of the COVID-19 pandemic, in contrivance to the language in its commercial property insurance policies.
The plaintiff, a Bellevue, Washington hair salon, alleges ACE has improperly applied a blanket policy of denying policyholders’ claims for damages resulting from government shut-down orders issued in response to the coronavirus. The suit claims the across-the-board denials have deprived policyholders of insurance benefits for which they’ve paid monthly premiums.
The plaintiff says it purchased one or more all-risk ACE insurance policies that provided “broad property and business interruption coverage,” including business income, extra expense, extended business income and civil authority coverage. Per the case, the plaintiff’s policy promised to pay the business for “direct physical loss of or physical damage to” covered property.
In late February 2020, Washington Governor Jay Inslee began issuing a series of proclamations and executive orders in response to the pandemic that caused the plaintiff business to close or suspend its operations, the complaint says. According to the suit, the plaintiff business has been unable to use the covered property for its intended purpose due to its compliance with state government orders.
“Plaintiff invested in its business property, insured the business property, and insured the income derived from its business property, but Plaintiff was deprived of its property’s functionality due to the government’s response to the COVID-19 pandemic,” the complaint attests.
The lawsuit claims the plaintiff’s property has sustained direct physical loss or damage related to COVID-19 and corresponding proclamations and orders.
Although the plaintiff submitted a claim for covered losses in late February 2021, the defendant denied the hair salon’s claim, stating it had “not received any information establishing any direct physical loss or damage at [Plaintiff’s] impacted locations,” the suit says. According to the case, ACE’s statement was not only false but misquotes the plaintiff’s insurance policy “and is therefore misleading.”
Moreover, the lawsuit claims the defendant’s insistence that “[t]here is no information supporting any direct physical loss or damage has occurred that caused such [governmental] orders to be issued” is also false and misleading in that it incorrectly implies that coverage is only available under the policy if physical loss or damage occurred at a property other than the plaintiff’s location.
The plaintiff claims ACE has similarly denied other policyholders’ claims without conducting a meaningful investigation of their properties; the “timing, scope, or impact” of government orders affecting policyholders’ businesses; or the community spread in the vicinity of the properties.
“Upon information and belief, Defendant has denied and will deny coverage to Plaintiff and all other similarly situated policyholders based on Defendant’s uniform policy to deny business interruption claims stemming from government closure orders related to COVID-19,” the complaint claims.
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