Barbizon International, Inc., holds two policies with Sentinel to cover its acting studios on both sides of the country. Its West Coast policy has a specific endorsement that excludes viruses but offers limited coverage if a virus loss is caused by a special event such as a windstorm or explosion, among others.
However, the school's East Coast policy that covers its Manhattan studio does not have any virus endorsement or virus exclusion, according to the suit. The acting school was forced to close its studios in both San Francisco and New York because of state-mandated closures in March.
In June, the company filed two loss claims for the two studios and Sentinel denied both claims under the two separate policies on the same day, asserting that the novel coronavirus did not cause property damage in its studios.
According to the complaint, the West Coast policy denial letter further stated that "even if the virus did cause damage, it is excluded from the policy," and the policy's limited virus coverage does not apply to its San Francisco studio's alleged losses, which were not caused by any of the special events in the policy's virus endorsement.
On Friday, Barbizon alleged that Sentinel wrongly denied coverage for its Manhattan studio because the insurer specifically chose not to exclude viruses in its New York policy.
"The Virus Exclusion does not appear in the NY Policy," the school said. "An objectively reasonable policyholder purchasing both the NY Policy and the West Coast Policy would conclude that 'virus' is a 'Covered Cause of Loss' in the NY Policy because Hartford knew how to exclude 'virus' [...] as it did in the West Coast Policy."
Additionally, if the insurer maintains that a virus is never capable of causing "direct physical loss of or damage to" property, then the virus endorsement in its West Coast policy would be meaningless and illusory, Barbizon said. Because the West Coast policy expressly acknowledged that some limited coverage is available if there is "direct physical loss or direct physical damage to covered property caused by … virus" resulting from a special event.
The acting school is alleging breach of the insurance contract and good faith, seeking over $500,000 in damages with the exact amount to be determined at trial.
Representatives for the parties could not be immediately reached for comment on Friday.
The school is represented by Gregory Blue of Lachtman Cohen PC.
Counsel information for Sentinel was not immediately available.
The case is Barbizon School of San Francisco Inc. et al v. Sentinel Insurance Co. et al, case number 3:20-cv-08578, in the U.S. District Court for the Northern District of California.
--Editing by Amy Rowe.
For a reprint of this article, please contact reprints@law360.com.