Truhaven Enterprises Inc., doing business as Fiorino Ristorante in Summit, New Jersey, on Monday said Chubb improperly rejected its claim for business interruption coverage this month on the grounds that the restaurant had not been "physically altered," saying that determination runs afoul of applicable case law.
Chubb and most other insurers who have issued such policies "are denying the obligation to pay for business income losses and other covered expenses incurred by policyholders for the physical loss and damage to the insured property from measures put in place by the civil authorities to stop the spread of COVID-19 among the population," the complaint said.
The lawsuit seeks a ruling that the crisis and prevention measures trigger that coverage and that Chubb is on the hook for the losses suffered by its insureds.
The case was filed on the same day two Pennsylvania businesses, which are suing Admiral Insurance Co., filed a petition with the U.S. Judicial Panel on Multidistrict Litigation seeking consolidation of similar suits. On Friday, another pair of Keystone State businesses filed related actions against Erie Insurance Exchange.
Similar insurance lawsuits have been filed by restaurants in Florida and Washington, D.C., claiming local shutdown orders caused their business losses.
In the current matter, Fiorino Ristorante said its "success depends on patrons being able to consume the products offered at the restaurant in that facility."
But the Italian eatery and other nonessential businesses have suffered financial blows in the wake of orders handed down by New Jersey Gov. Phil Murphy to prevent the spread of the novel coronavirus.
On March 9, Murphy declared a state of emergency and public health emergency in connection with the outbreak. A week later, the governor signed an executive order that restricted restaurants to delivery and take-out orders, among other measures.
Chubb on April 1 posted a notice on its website with respect to business interruption coverage related to the pandemic, according to the complaint. The notice addressed coverage for "physical loss or damage" to an insured's property from a "'covered peril.'"
"The presence of an infectious agent or communicable disease at a location where there is covered property generally will not mean that property has suffered 'physical loss or damage' under your policy," the notice said. "Generally, 'physical loss or damage' means that the physical structure or physical characteristics of the property have been altered by a 'covered peril.'"
The company later denied Fiorino Ristorante's claim for business interruption insurance in a letter, "taking the position that plaintiffs' premises had not suffered direct physical loss or damage for purposes of that coverage," among other findings, the complaint said.
The letter and the notice were wrong in that the business "had suffered direct physical loss or damage within the definition of the policy," the complaint said. Chubb was incorrect in claiming on its website that "loss of use or diminished value of property that has not been physically altered will not be considered 'physical loss or damage,'" the complaint said.
"In fact, applicable case law holds that loss of use of property that has not been physically altered does constitute 'physical loss or damage' for purposes of first-party property insurance, such as that contained in the policy," the complaint said.
The complaint added, "As drafter of the policy, if Chubb had wished to exclude from coverage as 'physical loss or damage' loss of use of property that has not been physically altered, it could have used explicit language stating such a definition of 'physical loss or damage.' It did not do so."
Fiorino Ristorante is seeking to represent a nationwide class of entities that entered into standard all-risk commercial property insurance policies with Chubb that cover business income losses and "do not exclude coverage for pandemics, and who have suffered losses due to measures put in place by civil authorities to stop the spread of COVID-19." The restaurant also proposed a sub-class of such entities that insured property in New Jersey.
Chubb told Law360 in a statement Tuesday, "As a matter of policy, Chubb does not comment on client claims or pending legal matters."
Counsel for Fiorino Ristorante did not immediately respond to a request for comment Tuesday.
Fiorino Ristorante is represented by James E. Cecchi and Lindsey H. Taylor of Carella Byrne Cecchi Olstein Brody & Agnello PC, Christopher A. Seeger and Stephen A. Weiss of Seeger Weiss and Samuel H. Rudman, Paul J. Geller and Stuart A. Davidson of Robbins Geller Rudman & Dowd LLP.
Counsel information for the defendants was not immediately available.
The case is Truhaven Enterprises Inc. d/b/a Fiorino Ristorante v. Chubb Ltd. et al., case number 2:20-cv-04586, in the U.S. District Court for the District of New Jersey.
--Additional reporting by Matt Fair and Matthew Santoni. Editing by Janice Carter Brown.
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