Pre-denial Business Interruption Coverage Suits in California
Oakland, CA – We previously highlighted that many businesses are not first waiting for coverage determinations before suing their insurers. Now, in a single day, five lawsuits were filed seeking business interruption coverage for losses related to COVID-19, this time in Los Angeles County Superior Court.
On April 13, 2020, attorney Mark Geragos, his Los Angeles law firm, and three businesses—a downtown Los Angeles restaurant, a café and deli in Montrose, and a business center in La Canada Flintridge—filed five separate lawsuits against The Travelers Indemnity Company of Connecticut in Los Angeles County Superior Court, claiming the insurer is wrongfully refusing to cover claims stemming from the COVID-19 pandemic. No coverage determination (i.e., denial) by Travelers is alleged. Rather, each accuses Travelers of failing to honor insurance policies covering business losses triggered by Los Angeles Mayor Eric Garcetti’s March 15, 2020 order closing nonessential businesses. Garcetti is also named as a defendant in the lawsuits.
According to the complaints, the “currently raging pandemic” has caused physical loss and damage around the world, including at a Glendale, California property owned by Geragos, at his law firm’s downtown Los Angeles office, and at the restaurants and business center. According to the plaintiffs, access to the properties and businesses has been limited or prohibited since Garcetti's order and a subsequent statewide “stay-at-home” order were issued.
Specifically, Geragos alleges that he has dealt with unpaid rent and other tenant-related issues at his Glendale property, and his firm is dealing with a substantial loss in business and “client/law-related business activities.” The downtown Los Angeles and Montrose restaurants have said that the pandemic has caused them to mostly shut down. And, the business center has been dealing with unpaid rent because tenant access is prohibited. The plaintiffs seek a declaratory judgment that Garcetti’s order amounts to a prohibition on access to the insured premises, and, therefore, that such prohibition triggers coverage under the policies which do not include an exclusion for a viral pandemic. “Any effort by Travelers to deny the reality that the coronavirus causes physical loss and damage would constitute a false and potentially fraudulent misrepresentation that could endanger policyholders, such as plaintiff and the public,” they said.
Meanwhile, Travelers has said that its standard commercial property policies that include business interruption coverage also have “very specific exclusions stating that losses from a virus or bacteria, including physical damage or income, are not covered.”
Just like the plaintiffs in these five lawsuits and the restaurant-plaintiffs in French Laundry Partners LP v. Hartford Fire Insurance Company, et al., in the Napa County Superior Court—the first business interruption coverage lawsuit in California related to COVID-19 losses stemming from government decrees—more and more businesses are not first waiting on their insurer’s coverage determination before suing for coverage.
The cases are Geragos & Geragos APC, v. Travelers Indemnity Co. of Connecticut, case number 20STCV14022; Mark J. Geragos v. Travelers Indemnity Co. of Connecticut, case number unavailable; 2420 Honolulu Ave. LLC v. Travelers Indemnity Co. of Connecticut, case number 20STCV14000; 837 Foothill Blvd. LLC v. Travelers Indemnity Co. of Connecticut, case number 20STCV13929; and 10E LLC v. Travelers Indemnity Co. of Connecticut, case number 20STCV14043, all in Superior Court of the State of California for Los Angeles County.
McDowell Hetherington continues to monitor the impact of the COVID-19 pandemic on litigation in California and throughout the country. For more information, please contact McDowell Hetherington attorneys Jodi Swick and Alec DiMario.
Originally Published on April 17, 2020