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Law360 (May 22, 2020, 5:16 PM EDT ) A Georgia bankruptcy law firm is suing Hartford Casualty Insurance Co., alleging that it wrongfully denied coverage for business income losses resulting from state-mandated shutdowns during the COVID-19 pandemic.
Karmel Davis and Associates Attorneys-At-Law LLC said Thursday that an "all risk policy" from Hartford should cover its losses because the policy does not contain any exclusions regarding business or property losses from a virus or pandemic, according to the complaint.
"Had [Hartford], as the drafters of the policy, wanted to exclude the risks of a virus or a pandemic, and related issues, like closure orders and social distancing, they could easily have done so in plain text (without trying to retroactively rewrite their policies)," the firm argued.
The bankruptcy litigation law firm said Hartford and Hartford Financial Services Group Inc. rejected its claim by asserting that the coronavirus pandemic and related civil authority orders to close businesses did not constitute property damage. The insurers also cited a pollution exclusion that would void coverage for losses caused by "release or escape of 'pollutants and contaminants.'"
Karmel Davis is seeking to represent a nationwide class of policyholders whose business insurance claims with Hartford were denied, whose insurance policies do not exclude viruses and who experienced business suspension due to civil authority orders during the pandemic.
In the suit, Karmel Davis claimed that Hartford is straining its credibility by stating that it is unaware of the statewide shelter order that implicates the civil authority coverage. The novel coronavirus can create physical damage because it can stay on a property's surface for days, the firm added.
The firm contended that COVID-19 does not trigger the pollution exclusion in the policy because "a virus is not a solid, liquid, gaseous, or thermal irritant or contaminant."
"Unfortunately, viruses are generally outside the scope of business interruption coverage due to the absence of any physical damage," said Thom Cordeiro, a spokesperson for Hartford, in an email statement. "These policies do not cover this exposure and, accordingly, premiums were never collected for it."
The Douglasville, Georgia-based firm has held a business owner policy with Hartford since 2010 and currently pays an annual premium of $460. It was forced to cease most business activities since the government-ordered shutdown, according to the suit.
Karmel Davis said it has suffered significant revenue loss because it has lost physical access to bankruptcy courts and other businesses that have closed to curb the spread of the pandemic.
On March 14, Georgia Gov. Brian Kemp declared a public health state of emergency, and issued a statewide shelter in place order on April 2.
And, according to the complaint, the Northern District of Georgia bankruptcy court issued orders to change court operations such as delaying creditors meetings scheduled in all bankruptcy cases from March 16 through April 10, as well as the suspension of other deadlines for resetting creditor meetings.
"The physical loss or physical damage at the Bankruptcy Court for the Northern District of Georgia (as evidenced by the bankruptcy orders) was due to the restrictions placed by the shelter order and COVID-19," the firm said in the complaint.
Karmel Davis is demanding a jury trial and asking the court to hold that Hartford should reimburse all of its and other class members' losses amid business interruption and future business restoration due to COVID-19 and civil authority closures, according to the suit.
Representatives for Karmel Davis did not immediately respond to calls and email requests for comment.
Karmel Davis and Associates Attorneys-At-Law LLC is represented by Rachel Soffin of Greg Coleman Law PC.
Counsel information for Hartford was not available.
The case is Karmel Davis and Associates et al. v. Hartford Financial Services Group. In et al., case number 1:20-mi-99999, in the U.S. District Court for the Northern District of Georgia.
--Editing by Michael Watanabe.
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