By Bill Wichert

Law360 (April 7, 2021, 5:21 PM EDT ) Highgate Hotels LP has slammed a Liberty Mutual unit and eight other insurers with a New Jersey state lawsuit alleging they improperly refused to cover its losses at properties across the country with respect to the COVID-19 pandemic under an insurance program affording $600 million in coverage.

The Texas-based hospitality company, which runs hotels under the Westin, Hilton and other brands, on Tuesday said the coverage denial was a "blatant disregard" for its contractual rights after the business was forced to restrict its operations in more than a dozen states as a result of government orders aimed at curbing the spread of the novel coronavirus.

"These losses and expenses are not excluded from coverage under the policy, and because the policy is an all risk policy, Highgate is entitled to payment for these losses and expenses," the complaint said, referring to the overall program of commercial property insurance.

The insurers were obligated "to provide coverage for, and to pay, business income losses and extra expense losses resulting from the necessary interruption of Highgate's operations, including interruptions resulting from actions of civil authorities, the impairment of ingress and egress to Highgate's properties, and the actual or suspected presence of a contagious disease on insured premises," according to the complaint.

"Defendants' actions in failing to accept Highgate's claims were a blatant disregard for the contractual rights of Highgate resulting in a material breach of defendants' duties and obligation owed under the policy, depriving Highgate of the benefit of its bargain and causing it serious financial damages," the complaint said.

The program, which was in effect from Dec. 1, 2019, to Oct. 1, provided a total of $600 million in coverage, including $180 million from Liberty Mutual Fire Insurance Co., $120 million from QBE Specialty Insurance Co., and $90 million each from Allianz Global Risks U.S. Insurance Co. and American Guarantee and Liability Insurance Co., according to the complaint.

The complaint highlighted various provisions within the program, including that the insurers "promised to pay for loss of business income sustained associated with the actual or suspected presence of a communicable disease" and provide coverage for losses due to "the inability to accept, or cancellation of, bookings at its insured premises."

The program also provides "'attraction properties'" coverage related to impacts on third-party properties that would typically draw customers to Highgate's operations, the complaint said. The insurers further "promised to pay for losses incurred due to the actions of civil authorities if access to property is impaired by order or action of civil or military authority," the complaint said.

Amid the public health crisis, the virus has been transmitted at Highgate properties, and the business was forced to "suspend, limit or otherwise modify" its operations as a result of pandemic-related orders in 17 states, Puerto Rico and Washington, D.C., the complaint said.

"As a result of the COVID-19 pandemic, Highgate's insured premises, properties and facilities were contaminated with the coronavirus and/or could no longer be accessed, used or operated due to orders of civil authorities issued in response to the coronavirus and COVID-19," according to the complaint.

Highgate provided each insurance company with "notice of loss" in March 2020, the complaint said. But in a Feb. 16 response, the insurers "reneged on these obligations and wrongfully failed to fulfill its contractual obligation."

Representatives for Liberty Mutual and Intact Insurance Group USA LLC, the parent of defendant Homeland Insurance Co. of New York, said the companies declined to comment Wednesday.

A statement provided Wednesday to Law360 on behalf of defendant Allianz Global Risks U.S. Insurance Co. stated, "We are unable to comment on individual claims, settlements or pending legal matters. As a result of the coronavirus pandemic, Allianz Global Corporate & Specialty, the corporate insurer of Allianz Group, has been notified of a number of claims from businesses around the world, which we evaluate on a case-by-case basis to determine coverage."

The statement continued, "We will certainly honor COVID-19-related claims where they are part of our policies and cover is clear. However, many businesses will not have purchased cover that will enable them to claim on their insurance for COVID-19 pandemic losses."

Counsel for Highgate and representatives for the other insurers did not immediately respond to requests for comment Wednesday.

Highgate is represented by James E. Cecchi and Caroline F. Bartlett of Carella Byrne Cecchi Olstein Brody & Agnello PC.

Counsel information for the defendants was not immediately available.

The case is Highgate Hotels LP v. Liberty Mutual Fire Insurance Co. et al., case number L-2318-21, in the Superior Court of New Jersey, County of Bergen.

--Editing by Daniel King.

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