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Harford Mutual Insurance Company is facing a lawsuit from a group of hotels and hotel management companies alleging that their loss claims related to the coronavirus outbreak were improperly denied.
According to the complaint, the hotels’ claims for business losses in the wake of coronavirus closures were denied on the basis of a “virus exclusion” in their Harford Mutual policies. However, the hotels say that their insurance claims should be accepted under a clause in the policy that expressly includes losses caused by lack of access due to the order of a civil authority.
The plaintiffs explain that they purchased an “All Risks” policy from Harford. They say they believed that the insurance would protect their businesses from damage and loss of income in the event of a shutdown or closure outside of their control.
The coronavirus lawsuit states that such a situation occurred in March of this year when the governors of Pennsylvania, Virginia, and New Jersey shut the state down due to concerns about the spread of the coronavirus.
“Plaintiffs faithfully paid the policy premiums and reasonably expected that the business interruption, extra expense, and/or civil authority coverage provided by defendant would protect against losses in the event of loss or damage to property, including in a pandemic, or that state and/or local officials ordered the closure of its business due to public safety concerns,” contends the lawsuit.
Indeed, the plaintiffs point out that government orders resulted in their businesses closing, not contamination by the virus itself. However, Harford still denied millions of dollars in claims under their business interruption insurance policies, alleges the complaint.
The hotels and hotel management companies do argue that they suffered a physical loss due to the spread of COVID-19, though the Harford Insurance policy does contain an exclusion for losses resulting from any virus, bacterium, or other organisms.
“The risk of COVID-19 entering the covered property and contaminating the surfaces is direct physical loss of and damage to the covered property,” explains the complaint. “The COVID-19 pandemic renders the covered properties unsafe, uninhabitable, damaged, or otherwise unfit for its intended use, which constitutes direct physical loss.”
According to the lawsuit, the insurance industry has long admitted that the presence of a virus or other disease can be considered physical damage to property. The hotels point to 2006 guidance from the Insurance Services Office stating that “[d]isease-causing agents may render a product impure (change its quality or substance), or enable the spread of disease by their presence on interior building surfaces or the surfaces of personal property.”
Despite these guidelines, the plaintiffs say that their claims for business losses from the coronavirus outbreak and state-mandated shutdowns were denied by Harford in May of this year.
The lawsuit alleges that Harford is using the virus exclusion included in its business interruption insurance policies unfairly to obtain premium payments from the plaintiffs, but also to deny coverage when needed.
The lawsuit claims that the hotels suffered losses due to COVID-19 closures and continue to suffer damage because of restrictions on the number of guests permitted in their properties.
The complaint points out that the hotels are enclosed buildings where the spread of the virus through respiratory droplets is more likely to occur.
Additionally, hotel employees are required to interact in close proximity to each other and hotel property, increasing the risk of transmission.
“As a direct result of the COVID-19 pandemic and the Closure Orders, Plaintiffs have incurred, and continue to incur, among other things, direct physical loss of or damage to property, a substantial loss of business income and additional expenses covered under the Policy,” allege the plaintiffs.
The hotels are seeking damages for their financial losses suffered due to the coronavirus outbreak closures, as well as for breach of contract by Harford Insurance. In addition, the plaintiffs want a court order forcing Harford to provide business interruption insurance coverage to “ensure the survival” of their businesses.
As the pandemic drags on, keep up to date with coronavirus legal news using Top Class Actions’ complete guide!
Are you a business owner with interruption insurance? Did your insurance cover coronavirus outbreak losses? Tell us what happened in the comment section below!
The lead plaintiffs are represented by Sol H. Weiss, James R. Ronca, Gregory S. Spizer, Stanford B. Ponson, and Paola Pearson of Anapol Weiss.
The Coronavirus Outbreak Insurance Lawsuit is SSN Hotel Management LLC et al. v. Harford Mutual Insurance Co., Case No. 2:20-cv06228, in the U.S. District Court for the Eastern District of Pennsylvania.
Coronavirus Lawsuits & Legal Issues
Since the COVID pandemic shut down the country, Top Class Actions has been keeping you up to date on the latest Coronavirus lawsuits and legal issues.
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