HTR Restaurants Inc., doing business as Sieb's Pub in Ross Township, and Joseph Tambellini Inc., which operates Joseph Tambellini Restaurant in Pittsburgh's Highland Park neighborhood, both say that Erie has denied or refused to acknowledge coverage of the harms that restaurants, bars and banquet facilities have suffered because of possible COVID-19 contamination and the state-mandated closure of nonessential businesses.
"The COVID-19 virus, as evidenced by these orders, causes damage to property, particularly in places of business such as that of plaintiff, Sieb's Pub and other similarly situated persons and organizations, where the operation of the business requires interaction, gatherings and contact in areas where there exists a heightened risk of contamination by the COVID-19 virus," Sieb's complaint said. "As a result of the impact of the COVID-19 virus and the referenced orders of the governor, plaintiff, Sieb's Pub, has been ordered to close its business and forced to furlough employees, thereby incurring loss."
While other businesses in Pennsylvania, Florida, and Washington, D.C., have made similar claims against their insurers, Friday's suit by Sieb's Pub was filed as a class action. Sieb's sought to represent similarly situated Pennsylvania businesses with Erie policies that had suffered losses because of the pandemic and been denied coverage, though Tambellini was proceeding as an individual lawsuit.
"This is the first class action to be filed in Pennsylvania addressing the COVID-19 coverage issues. This lawsuit seeks to protect the rights of owners of small businesses in Pennsylvania who were led to believe that they had adequate coverage to protect themselves," said James Haggerty, one of the attorneys representing the restaurants. "Erie, like all other insurers, has told them that they are sadly mistaken. We hope to remedy that wrong."
The complaints both said Sieb's and Tambellini had "ultra pack plus commercial general liability" policies with Erie that should cover losses incurred as a result of the government's coronavirus response and would not have any exceptions that would be triggered by the virus. Though many insurance policies include exclusions for losses caused by contamination from "viruses and bacteria," the Erie policies attached to the complaints replaced those with exclusions for "fungus and bacteria."
On March 19, Pennsylvania Gov. Tom Wolf ordered all "non-life sustaining businesses" in the state to close their physical locations. He issued a stay-at-home order for residents of some counties starting March 23, and the rest of the state April 1, the complaints said.
Though some restaurants have been given exceptions to stay open for carry-out service, the lawsuits said both Sieb's and Tambellini have had to close and furlough employees. The state orders counted as "civil authority" events that were covered by their Erie policies, the suits said.
"Plaintiff … has suffered business income, civil authority and other related losses which are covered," the complaints both said.
Because the novel coronavirus can remain contagious for days on surfaces and spreads easily, bars, restaurants and banquet facilities like the plaintiffs' were particularly vulnerable to contamination, the suits said.
"Tambellini, like many businesses, operates in 'closed environment' where many persons, including employees and customers, cycle in and out thereby creating a risk of contamination to the insured premises," the Tambellini complaint said. "As a result of the COVID-19 virus, the business of plaintiff Tambellini, like other similarly situated businesses, is susceptible to person to person, person to property, and property to person transmittal and contamination."
But when the restaurants submitted claims to Erie Insurance for lost business income, extra expenses, contamination cleanup, civil authority and other coverages allegedly available under their policies, they said Erie denied the claims.
On behalf of itself and similarly situated businesses, Sieb's sought a declaration from the Allegheny County Court of Common Pleas that COVID-19-related losses were covered under their insurance policies and asked for an injunction blocking Erie from further denials.
Tambellini made individual claims for declaratory and injunctive relief, and also sought compensation from Erie for its allegedly covered losses.
"Defendant, Erie, has breached the terms and provisions of the Erie policy by denying the claims of plaintiff, Tambellini, for all losses caused by the COVID-19 virus and the referenced orders," the complaint said. "The breach of the indemnification obligations under the Erie policy by defendant Erie has caused plaintiff Tambellini to suffer loss and harm."
A representative of Erie Insurance declined to comment on the specific cases but said that generally, business interruption insurance wasn't intended to cover things like the coronavirus crisis.
"Business interruption insurance is generally not designed or priced to include pandemic outbreaks and premiums are not calculated or collected based on providing coverage against communicable diseases. Business interruption insurance covers financial losses when a business cannot function because of physical damage to a commercial property," said spokesperson Matthew Cummings. "Erie is considering all claims submitted on a case-by-case basis and decisions are based on the facts and circumstances as well as policy provisions and individual coverages."
Haggerty said Tambellini was proceeding as an individual lawsuit to more quickly address the coverage issues presented, and other individual lawsuits could be forthcoming.
The restaurants are represented by James C. Haggerty of Haggerty Goldberg Schleifer & Kupersmith PC, Scott B. Cooper of Schmidt Kramer PC, John P. Goodrich of Jack Goodrich & Associates PC and Jonathan Shub of Kohn Swift & Graf PC.
Counsel information for Erie was not immediately available.
The cases are HTR Restaurants Inc. v. Erie Insurance Exchange, case number GD-20-005138, and Joseph Tambellini Inc. v. Erie Insurance Exchange, case number GD-20-005137, both in the Court of Common Pleas of Allegheny County, Pennsylvania.
--Editing by Haylee Pearl.
For a reprint of this article, please contact reprints@law360.com.