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Law360 (May 6, 2020, 7:36 PM EDT ) A New Jersey eatery hit Chubb Ltd. with a proposed class action Tuesday accusing the insurer of wrongfully denying business interruption coverage to restaurants shuttered due to COVID-19, calling food "vital to the national spirit" and bemoaning the loss of income to eateries and their employees.
Benito Ristorante in Union is seeking a declaration in New Jersey federal court that it's owed coverage as well as contract-breach damages from Chubb and its subsidiary Indemnity Insurance Company of North America. The restaurant says eateries can't get the business interruption coverage from Chubb for the unforeseen pandemic losses despite having all-risk policies.
"Defendants, and most insurance companies who have issued all-risk commercial property insurance policies with business interruption coverage, 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 complaint details the history of the global health crisis, from the World Health Organization's international public health emergency warning in late January to the government's widespread shutdown orders in March that forced sit-down eateries to limit service to take-out or deliveries. New Jersey was among the first states to declare a state of emergency and Gov. Phil Murphy issued business restrictions on March 16, according to the complaint.
The "catastrophic" consequences have included furloughed employees and an abrupt shutdown of cash flow that threatens restaurants' survival, Benito claimed. Also, society at large is suffering from the denial of dining options, according to the complaint, which quoted a 19th century Irish poet and a late celebrity chef.
"In addition to their contribution to the national economy in providing jobs, restaurants are also vital to the national spirit because shared meals are an important mental relief. As Oscar Wilde noted, 'After a good dinner, one can forgive anybody, even one's relations,'" the complaint said.
"Moreover, food is part of the national psyche. As Anthony Bourdain noted, 'Food is everything we are. It's an extension of nationalist feeling, ethnic feeling, your personal history, your province, your region, your tribe, your grandma. It's inseparable from those from the get-go,'" the complaint said.
All-risk commercial property insurance policies promise to indemnify policyholders for actual business losses incurred when operations are involuntarily suspended, interrupted or curtailed, including when a civil authority issues such orders, the complaint said.
But in an April 1 notice to policyholders on its website, Chubb said business interruption insurance generally covers losses related to disruptions to operations, but that "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 COVID-19 pandemic and the resulting government-mandated shutdowns should trigger that coverage despite the exclusion for losses due to a virus or bacteria, the complaint said. Benito and proposed class members indeed suffered a "direct physical loss or damage" that was covered because the government shutdown denied them the use of their restaurants for their intended purposes, according to the complaint.
Benito wants to represent a nationwide class of restaurants denied business interruption coverage as well as a subclass of New Jersey eateries.
Representatives for the parties didn't immediately respond to requests for comment.
Benito 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 LLP, and Samuel H. Rudman, Paul J. Geller and Stuart A. Davidson of Robbins Geller Rudman & Dowd LLP.
Counsel information for the defendants wasn't available.
The case is Beniak Enterprises Inc. d/b/a Benito Ristorante, on behalf of itself and all others similarly situated, v. Chubb Ltd., case no. 2:20-cv-05536, in the U.S. District Court for the District of New Jersey.
--Editing by Jack Karp.
For a reprint of this article, please contact reprints@law360.com.
