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Law360 (June 4, 2020, 4:06 PM EDT ) Two California flower importers have sued Travelers Property Casualty Co., alleging Wednesday that the insurer mistreated their $2 million property loss claims as COVID-19-induced business interruption claims and wrongly denied their requests for coverage.
FlorExpo LLC and its subsidiary Kendal Floral Supply LLC told a California federal judge that Travelers sent them a generic pandemic business loss denial letter in late April when 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, FloraExpo 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 said they were "prevented by government authorities" from accessing their flower warehouses from March 16 to March 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 alleged in the complaint.
"We are disappointed that the Travelers adjuster did not bother to understand the actual loss of merchandise claim, or how the policy is supposed to work," said Marc Halpern, an attorney representing FloraExpo and Kendal. "Travelers is letting its policyholders down if it is just issuing knee jerk denials like this," he added.
The flower importers contended 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 alleged.
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 added.
FloraExpo and Kendal are asking the court to hold that Travelers should pay for their property loss, and demanding compensatory damages to be determined at trial, as well as attorney fees.
Travelers did not immediately answer calls seeking comment Thursday.
FloraExpo and Kendal are represented by Marc D. Halpern and Douglas J. Brown of Halpern May Ybarra Gelberg LLP.
Counsel information for Travelers could not be immediately determined.
The case is FlorExpo LLC et al. v. Travelers Property Casualty Company of America, case number 3:20-cv-01024, in the U.S. District Court for the Southern District of California.
--Editing by Kelly Duncan.
Update: This story has been updated with comment from the plaintiffs' attorney.
For a reprint of this article, please contact reprints@law360.com.
