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Posts Tagged ‘insurance company’

Insurer seeks declaration that COVID-19 claims for closure-related losses are not covered

Posted on: April 27th, 2020

By Barry Miller

Travelers Insurance Company wants a federal court to declare it has no duty to pay business income loss to a California law firm which claims that COVID-19 closures have caused it to lose revenue.

The ABA Journal reports that Travelers is seeking a declaratory judgment in the Central District of California. The lawsuit addresses claims from the Geragos & Geragos firm in Los Angeles, which says it has lost revenue from its law practice and rent from a tenant because of the closure of its own office, and California courts.

Travelers alleges that attorney Mark Geragos told a claims representative that the COVID-19 virus causes physical damages because other countries affected by the virus have fumigated public spaces. He also stated that scientists have detected the virus in aerosols and on lingering surfaces for some time.

Travelers seeks a declaration the claim does not fall within the policy’s grants of coverage for either “Business Income and Extra Expense” or “Civil Authority.”  Travelers alleges that Geragos’ claims do not trigger the policy’s Business Income and Extra Expense that requires that a loss was “caused by direct physical loss of or damage to property at the described premises.” Likewise, Travelers contends that the Civil Authority coverage requires that any government closure order result from “direct physical loss of or damage to property at locations, other than described premises, that are within 100 miles of the described premises.”

Even if COVID-19 claims triggered either coverage, Travelers says that the Virus and Bacteria Exclusion would apply. It also relies on exclusions for damage caused by Ordinance or Law, Pollution, and acts of a group, organization, or governmental body as bases for the declaratory relief.

FMG has been reporting on lawsuits filed by restaurants, retail outlets, and other businesses making claims for business interruption coverage due to COVID-19 closures. The Travelers action appears to be the first one filed by an insurer.

If you have any questions or would like more information, please contact Barry Miller at [email protected].

Notice Prejudice Rule Alive and Well in California

Posted on: December 6th, 2018

By: Zach Moura

California’s Second District Court of Appeal said October 16th (Marty Lat v. Farmers New World Life Insurance Co., No. B282008, Calif. App., 2nd Dist., Div. 1, 2018 Cal. App. LEXIS 932) that under the notice prejudice rule, an insurance company may not deny an insured’s claim under an occurrence policy for lack of timely notice or proof of claim, unless it can show actual prejudice from the delay. The court further held that the insurer has the burden of establishing that it was prejudiced.

The insured, Maria Carada, had purchased an occurrence life insurance policy from Farmers New World Life Insurance Co. and named her sons as beneficiaries. The policy included a rider under which Farmers agreed to waive the cost of the insurance while the insured was disabled if Carada provided Farmers with notice and proof of her disability.

Carada was diagnosed with cancer and became disabled as a result, after which she stopped making payments on the policy. Two months after ceasing payments, Carada contacted the insurance agent who had sold her the policy, told the agent of her illness and disability, and asked if the policy could be reinstated. Farmers refused to reinstate the policy. Carada died the following month.

After the beneficiaries made a claim for benefits under the policy, Farmers denied the claim on the ground that the policy had lapsed before Carada died. Carada’s beneficiaries filed suit.

The Court reversed the trial court’s ruling granting an MSJ in favor of Farmers, determining that California’s “notice prejudice rule” applied to the Farmers’ policy rider regarding notice of a disability.

Finding that there was “no dispute” that Carada was totally disabled while the policy was in force and that she would have been entitled to the deduction waiver benefit if she had given Farmers timely notice of her disability, the Court held “Farmers could not deny Carada the benefit of the deduction waiver unless Farmers suffered actual prejudice from the delayed notice.” Because the Court determined that Farmers made no such showing, it held Carada was entitled to the deduction waiver benefit.

For any questions about this decision, or coverage questions generally, please contact Zach Moura at [email protected].

Court Ruling Highlights Importance of Policy Language

Posted on: April 11th, 2018

By: America Vidana

In Mt. Hawley Insurance Co. v. Tactic Security Enforcement, Inc., No. 6:16-cv-01425 (M.D. FL. 2018), U.S. District Judge Paul Byron of the Middle District of Florida recently denied an insurance company’s motion for summary judgment, in which it relied on an exclusion to deny coverage to its policyholder. The policyholder and restaurant establishment, Que Rico La Casa Del Mofongo, had two negligence lawsuits filed against it for allegedly failing to prevent violent incidences from occurring on its premises.

The insurer denied coverage per an exclusion included in the policy prohibiting “operations involving bars, taverns, lounges, gentlemen’s clubs and nightclubs.” The Court, however, found that the insurer failed to clearly define the terms cited in the exclusion. It noted that the policyholder’s establishment was interchangeably referred to as a “restaurant,” and at other times as a “lounge.” Consequently, because the terms “bars, “taverns,” “lounges,” and “gentlemen’s clubs” were undefined, it deemed the entire exclusion as imprecise and inapplicable—unilaterally denying the insurer’s summary judgment.

The Court’s decision in Mt. Hawley significantly reinforces the principle that precise policy language is required before an insurer can deny coverage based on an exclusion. It also highlights the importance for a policyholder to read the entire policy to ensure there are no broad exclusions that could potentially bar coverage.

If you have any questions or would like more information, please contact America Vidana at [email protected].