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Law360 (August 27, 2020, 5:15 PM EDT ) A Nashville bar run by country singer Dierks Bentley has challenged Mt. Hawley Insurance Co.'s refusal to cover its losses from government closure orders due to COVID-19, alleging in a suit removed to Arizona federal court that its losses are covered under an $8 million policy.
Whiskey Row Nashville LLC, doing business as Dierks Bentley's Whiskey Row, first sued Mt. Hawley in Arizona state court in late July before the carrier removed the suit to the district court Wednesday. The bar said it has suffered devastating revenue loss after being forced to suspend operations in March, and its very existence is at risk.
Dierks Bentley's pub alleged that Mt. Hawley is intending to injure its policyholder or create a risk of "significant harm" by wrongfully denying coverage without conducting a thorough investigation in late May. The bar holds a commercial property policy with an $8 million coverage limit for business interruption, according to the suit.
In the complaint, the bar said Mt Hawley "misrepresented" the government executive orders as mere "guidelines." Mt Hawley asserted in the coverage denial letter that Whiskey Row did not sustain a direct physical loss or damage because it was closed due to "government guidelines," according to the suit.
Whiskey Row said it incurred direct physical loss to its property including the customers losing access to physically enter and eat at the pub, and its ability to function as intended to provide dine-in service due to the government closure orders. The bar said case laws have held that physical damage is not restricted to physical destruction but also loss of access and loss of use.
The pub alleged that the insurer "glibly" stated that the government orders were put in place as a "preventive" measure to curb the spread of COVID-19, but not issued due to any covered loss causing damage to Whiskey Row's property. The orders were at least made partially due to the presence of COVID-19 in the community within its premise, the bar said.
However, since the government orders did not mention that the novel coronavirus was spreading on its property, Mt. Hawley cannot avoid paying claims by citing the policy's pollutant exclusion, the pub said. The carrier "intentionally" failed to mention that for the exclusion to apply, the pollutant "discharge" or "dispersal" must be from Whiskey Row's property, it added.
Yet nowhere in the government orders was it stated that pollutants or viruses were discharging or spreading from its properties' surface, Whiskey Row said, so the exclusion was not triggered.
The bar is alleging breach of contract in Mt. Hawley's denying coverage and breach of the duty of good faith and fair dealing in the carriers' alleged failure to conduct a complete claim investigation. It is seeking punitive and compensatory damages to be determined in a jury trial as well as attorney fees.
Representatives for the parties could not immediately be reached for comment Thursday.
Whiskey Row is represented by Jonathan Grant Brinson of Polsinelli PC.
Mt. Hawley is represented by Dean C Burnick of Morison & Prough LLP, Michael D Prough of Morison & Prough LLP and Jordan Ross Plitt and Steven Plitt of Cavanagh Law Firm PA.
The case is Whiskey Row Nashville LLC v. Mt. Hawley Insurance Co., case number 2:20-cv-01674, in the U.S. District Court for the District of Arizona.
--Editing by Stephen Berg.
For a reprint of this article, please contact reprints@law360.com.
