A BBQ restaurant in Memphis, Tenn. has filed a class action lawsuit against Erie Insurance Exchange alleging that the insurance carrier violated their business interruption insurance policy. The plaintiff, Three Little Pigs Bar-B-Q, claims that Erie wrongfully denied their claim seeking compensation for the losses they incurred due to the coronavirus.

According to their business interruption insurance class action lawsuit, Three Little Pigs purchased a general insurance policy from Erie in 2019 and later renewed that policy through April 2021. The policy included several types of coverage including business interruption insurance. This type of coverage replaces the income businesses lose due to a disaster. In this case, the plaintiff argues that coverage should include losses caused by the pandemic.

Tennessee Governor Bill Lee declared a state of emergency on March 13, 2020. By March 22, there were 66 confirmed cases of the virus in Shelby County, according to the class action lawsuit. A “safer at home” order was issued by Lee on March 31, following a national trend. While that order was in place, restaurants were prohibited from letting customers on their premises, according to the class action lawsuit.

According to the Tennessee Department of Health, as of Monday July 27, there are more than 96,000 cases of the novel coronavirus in the state. Nearly 23,000 people have tested positive for the virus in the county where Three Little Pigs is located alone. As the suit states, coronavirus is a “pervasive dangerous physical condition that exists throughout the State.”

Three Little Pigs closed their doors in March due to the risk of COVID-19. According to the suit, the business closure continued fully or partially for roughly four weeks. Restaurants were allowed to reopen on June 1, but only with limited seating and social distancing measures in place. These measures remain in place.

The plaintiffs filed an interruption claim with Erie on March 16, 2020. That claim was denied, the BBQ restaurant alleges.

Three Little Pigs argues that Erie’s refusal to provide compensation for the losses the restaurant suffered during their business closure due to coronavirus constitutes a violation of their shared policy.

As the class action lawsuit argues, that policy constitutes a “bilateral contract” meaning that, so long as the plaintiff makes their monthly payments, Erie is required to fulfill their “promises of coverage for certain losses,” including those covered by a business interruption insurance policy.

The policy purchased by the plaintiff is reportedly an “all risk policy” meaning it should cover any type of loss that is beyond the business owner’s control.

According to the class action lawsuit, the policy should cover all risks “no matter their source and however fortuitous the event or circumstance may be, as long as it is beyond the control of the insured and unless the policy contains a specific provision expressly excluding the loss from coverage.”

While some insurance policies include language specifically excluding damage caused by viruses, the plaintiff’s policy reportedly did not.

One of the key points argued by the plaintiffs is that any ambiguous language, like “loss,” in insurance policies “are to be construed liberally in favor of the insured in favor of providing coverage and strictly against the insurance company against denying coverage.” In previous claim denials, carriers have argued that the losses caused by coronavirus are not “physical” and thus not covered by the policy.

Three Little Pigs states that their policy also includes “Civil Authority” coverage which offers compensation for loss of income caused when “a civil authority prohibits public access to the business premises.” This coverage can reportedly be triggered due to business closure even if the standard business interruption insurance claim is denied. According to Three Little Pigs, this should include the stay-at-home order issued in Tennessee.

In Three Little Pigs’ case, Erie reportedly argued that their claim should be denied due to a “pollution” exclusion. Pollution is defined by the policy as “solid, liquid, gaseous or thermal irritant or contaminant.” The suit argues that none of the losses suffered by The Three Little Pigs can be attributed to anything that would fit that definition. Erie has allegedly used similar reasoning to deny business closure claims for others. Because of this pattern of denial, the plaintiffs are seeking to establish a Class of businesses affected by Erie’s allegedly wrongful actions.

This isn’t the first class action lawsuit of its kind to be filed against Erie Insurance. In Pennsylvania, a restaurant called La Campagna Ristorante filed class action litigation against the carrier after their business interruption insurance claim was denied. In that case, the claim was denied due to an exclusion for viruses, but the plaintiff argued their Civil Authority coverage should still apply.

Have you had a business interruption insurance claim denied despite COVID-19 business closures? Share your experiences in the comment section below.

Three Little Pigs and the proposed Class are represented by J. Luke Sanderson, Joe R. Whatley Jr., and W. Tucker Brown of Whatley Kallas LLP, along with Dennis G. Pantazis and D.G. Pantazis Jr. of Wiggins Childs Pantazis Fisher & Goldfarb.

The Business Interruption Insurance Class Action Lawsuit is Three Little Pigs Bar-B-Q Inc. d/b/a Three Little Pigs Bar B Cue v. Erie Insurance Exchange, Case No. 2:20-cv-02544, in the U.S. District Court for the Western District of Tennessee.

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