Travelers argued Wednesday that the "acts or decisions exclusion" within the policy held by the plaintiffs, FlorExpo LLC and its subsidiary Kendal Floral Supply LLC, bars coverage for losses resulting from a decision by any third party, including, specifically, a "governmental body."
"Plaintiffs allege that the cut flowers stored in the warehouses 'perished' because 'governmental authorities' prevented plaintiffs from accessing the warehouses," Travelers said. "It is difficult to imagine a clearer case for application of the acts or decisions exclusion."
The importers told the court in their June complaint that Travelers sent them a generic pandemic business loss denial letter in late April whereas they did not mention COVID-19 or business interruption at all when seeking coverage of physical damage for their perished flowers.
According to the complaint, Travelers started the denial letter by saying the flower distributors "presented a claim for loss of income related to the coronavirus outbreak." Yet, FlorExpo and Kendal argued, they "made clear they were seeking coverage for the physical loss of and damage to their stock of cut flowers."
The Carlsbad, California-based flower importers say they were "prevented by government authorities" from accessing their flower warehouses from March 16 to 22. And despite their effort to relocate their inventory before the warehouses closed, a significant number of the flowers could not be transferred and perished.
The flower importers filed a $2 million physical loss claim April 21, and Travelers rejected it nine days later, according to the suit.
Travelers failed to investigate the coverage request and "was pre-determined to deny coverage, regardless of the actual details of the claim," FlorExpo and Kendal allege in the complaint.
The flower importers contend that their "all-perils" policy, which covers up to $5.4 million of property loss of their flower stock, should pay for all physical damages unless expressly excluded.
"It is no secret that Travelers has been inundated with business interruption claims during the pandemic, but that does not give Travelers license to ignore its other property coverage responsibilities," the flower importers said.
FlorExpo and Kendal said their fresh-cut flowers imported from South America are highly perishable and time-sensitive. And since they routinely hold "many millions of dollars'" worth of flowers in warehouses, they specifically purchased the one-year commercial property policy from Travelers to protect themselves from potential physical damages, the flower importers said.
But on Wednesday, the insurer argued that the reason for denial was simple.
"Because the alleged loss of flower stock falls squarely within the policy's acts or decisions 'of any … governmental body' exclusion, the complaint does not plead a plausible entitlement to coverage for that loss, the expense incurred to dispose of the dead flowers, or the expense associated with moving other flower stock out of the warehouses," it said.
Representatives for the parties did not immediately respond to requests for comment Thursday.
FlorExpo and Kendal are represented by Marc D. Halpern and Douglas J. Brown of Halpern May Ybarra Gelberg LLP.
Travelers is represented by Randy M. McElvain and Edmond Sung of Weston & McElvain LLP and Gregory P. Varga and J. Tyler Butts of Robinson & Cole LLP.
The case is FlorExpo LLC et al. v. Travelers Property Casualty Co. of America, case number 3:20-cv-01024, in the U.S. District Court for the Southern District of California.
--Additional reporting by Daphne Zhang. Editing by Orlando Lorenzo.
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