Travelers, the Plaintiff-insurer in California Business Interruption Coverage Litigation

Oakland, CA – Much time and attention has been focused on the seemingly ever-increasing number of business interruption insurance coverage lawsuits policyholders have filed across the country in the last few weeks. However, insurance coverage battles related to losses from the COVID-19 pandemic have recently taken a unique turn.

We previously highlighted the multiplying number of businesses that are not first waiting on their insurer’s coverage determination before suing for coverage. In particular, we discussed the five lawsuits filed, in a single day, in Los Angeles Superior Court seeking COVID-19-related business interruption coverage from The Travelers Indemnity Company of Connecticut.

Since the nationwide proliferation of business interruption coverage litigation began in late March 2020, as of April 20, 2020, all but one of the more than sixty state and federal court lawsuits had been uniformly initiated by policyholder-businesses.

The one exception so far is the suit that Travelers Casualty Insurance Company of America filed on April 20, 2020, against Geragos & Geragos, APC, in California federal court, seeking a declaration that the law firm’s business losses related to COVID-19 are not covered because the virus has not caused “physical loss or damage” to the firm’s offices. Travelers’s complaint comes a week after Geragos & Geragos instigated a series of complaints in Los Angeles Superior Court accusing Travelers of wrongfully denying coverage to it and several other California businesses.

Now, turning the tables, Travelers says the policy Geragos & Geragos holds does not cover this pandemic and specifically excludes business losses resulting from a virus. “Travelers understands that the COVID-19 pandemic has affected the public and the vast majority of businesses throughout the country (and world) in unprecedented ways,” Travelers said in the complaint. “But these challenging and unfortunate circumstances do not create insurance coverage for losses that fall outside the terms of a policyholder’s insurance contract.” According to the complaint, the insurance policy only covers physical loss or damage to the property that results from a covered cause under the policy—the presence of COVID-19 does not cause physical damage.

The complaint continues that, while the policy includes an endorsement for civil authority orders, that clause is contingent upon the existence of a “direct physical loss of or damage to” property nearby, adding that the law firm’s loss of access to the courts resulted from government action and not physical loss.

As previously mentioned, Travelers also alleges that the insurance policy excludes loss due to virus or bacteria, which would bar coverage here, even if the business cessation could be considered a “physical loss.”

In response, Mark Gerago of Geragos & Geragos said that “Travelers Insurance, after cashing our premium checks for years, decided yesterday that instead of paying our business interruption claim that they would hire a large law firm to sue us in federal court instead. Apparently, their way of adapting to a pandemic is filing lawsuits against their own insured. We welcome the opportunity to fight on behalf of small business against rank corporate greed and their legal enablers.”

The case is Travelers Casualty Insurance Company of America v. Geragos & Geragos, APC, Case No. 2:20-cv-03619, in the U.S. District Court for the Central District of California.

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.