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Law360 (March 15, 2021, 8:17 PM EDT ) Mall owner Taubman Co. LLC sued Factory Mutual Insurance Co. in Rhode Island state court, alleging the insurer denied it coverage for losses stemming from the COVID-19 pandemic in an act of bad faith that was part of a companywide policy to deny coverage for similar claims.
Taubman alleged Friday that Factory Mutual denied its communicable disease coverage without investigating whether COVID-19 was present at any of its malls, and that it failed to evaluate — and thus wrongly denied — coverage under all other policies.
According to the breach of contract suit, the insurer had issued a memo that told adjusters to force all claims into the communicable disease category, issuing a blanket declaration that no other policies could apply to COVID-19 claims — as well as "talking points" instructing them on how to deny coverage of business losses due to the pandemic. Further, the memo wrongly limited any payout under the communicable disease category to $1 million when it should have covered up to $1 billion, the complaint alleges.
"Thus, prior to evaluating Taubman's claim, Factory Mutual had already predetermined its coverage position, namely that there is no coverage for Taubman's (or any other insured's) property and business interruption losses," it said. "Factory Mutual had predetermined that coverage, if any, would be limited to the 'specific limit' for the communicable disease coverage."
Taubman manages or leases 21 "premier regional, super-regional and outlet shopping malls" across 13 states, according to the complaint.
In August, Factory Mutual denied Taubman's coverage, stating that "it is unknown if there are any reported cases of COVID-19 at any of Taubman's insured locations," the complaint alleges.
Taubman says there have been instances of COVID-19 confirmed at its locations, and that the cleanup of such instances has required a substantial outlay of cash.
"To the extent Taubman's property and business interruption losses did not result from the need to respond to, clean up, and/or remediate the 'actual' presence of a communicable disease, but instead resulted from the 'risk' of physical loss of or damage to covered property, and/or the actual physical loss or damage to property from Coronavirus, the policies provide coverage for such losses up to the full $1 billion per occurrence limits of each of the policies," the suit says.
The suit hits the insurer with several claims of breach of contract and bad faith, while seeking a declaration from the court that Taubman, not Factory Mutual, is correctly interpreting the contract. The suit also seeks unspecified damages.
The complaint does not specifically allege how much damage Taubman has incurred as a result of the pandemic.
Taubman is represented by Stephen M. Prignano of McIntyre Tate LLP, and James R. Murray and Lisa M. Campisi of Blank Rome LLP.
Counsel for Factory Mutual was not immediately known.
The case is Taubman Co. LLC et al. v. Factory Mutual Insurance Co., case number PC-2021-01762, in the Superior Court for the State of Rhode Island.
--Editing by Regan Estes.
For a reprint of this article, please contact reprints@law360.com.
