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Law360 (March 25, 2021, 6:50 PM EDT ) An operator of 40 hotels across the country including Marriott and Fairfield Inn properties sued a Chubb unit and eight other insurers in Pennsylvania state court, saying it's owed $125 million in COVID-19-related business interruption coverage.
Shaner Hotel Holdings LP alleged Tuesday that the presence of the coronavirus and the government orders to close its operations in an attempt to stop the spread of the virus were a "direct physical loss, damage or destruction of and loss of use" of the hotels it owns and manages nationwide.
ACE American Insurance Co. and the other insurers who share the risk for $125 million in coverage can't escape their duty for the business interruption losses, Shaner said. The losses stem from the hotels' inability to provide hospitality for graduations, conferences and conventions that were all canceled.
Shaner said the Pennsylvania Supreme Court in Friends of Devito v. Wolf
held that the COVID-19 pandemic is a "natural disaster" because it involves "substantial damage to property." That decision supported Governor Tom Wolf's authority to declare a disaster emergency, Shaner said."The far-reaching restrictions and prohibitions imposed by the orders have been catastrophic for their business, interrupting and reducing operations and forcing them to close, thereby enduring a prolonged curtailment of earnings that threatens their survival," the hotel chain owner said.
Shaner filed suit in the Court of Common Pleas of Philadelphia County, alleging four of its insurers have together paid only a mere $250,000 for cancellation coverage. ACE has refused outright to provide communicable disease additional coverage in bad faith, according to the suit.
"The actual or suspected presence of SARS-CoV-2 virions and COVID-19 infected persons, all of which involve a communicable disease, has directly caused the covered hotel properties to totally or partially close under applicable state, city, or municipal department of health orders," Shaner said.
The hotel chain owner alleged the insurance companies, including certain Lloyd's underwriters, all knew about the risks connected with viruses and pandemics but didn't include any specific pandemic exclusions in their policies.
Even if the coronavirus didn't cause physical damage, Shaner alleged the presence of the virus made it unsafe for the hotels and their guests to use the properties, causing a physical loss. The government orders also restricted the use of the hotels, including their restaurants, according to the suit.
Shaner alleged claims for breach of contract against all the insurers and bad faith against only ACE.
Representatives for Chubb and certain underwriters at Lloyd's declined to comment.
Representatives for Shaner and the other insurers didn't respond to requests for comment on Thursday.
Shaner is represented by John N. Ellison, Timothy P. Law and Esther Y. Kim of Reed Smith LLP.
Counsel information wasn't immediately available for ACE, Endurance American Specialty Insurance Co., Ironshore Specialty Insurance Co., Interstate Fire and Casualty Co., certain Lloyd's underwriters, Everest Indemnity Insurance Co., Evanston Insurance Co., Princeton Excess and Surplus Lines Co., and Arch Insurance Co.
The case is Shaner Hotel Holdings LP v. ACE American Insurance Co. et al., case number 210302381, in the Court of Common Pleas of Philadelphia County, Pennsylvania.
--Editing by Ellen Johnson.
For a reprint of this article, please contact reprints@law360.com.
