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A tanning salon on the New Jersey shore that was denied a claim for business losses due to the coronavirus pandemic is now suing its insurance companies as part of a class action lawsuit.
Beach Glo Tanning Studio Inc. in Point Pleasant, N.J., was forced to close along with all other non-essential businesses when Gov. Phil Murphy ordered a comprehensive lockdown in March. The tanning salon remained closed for nearly four months, until the order was lifted in June, and lost a significant amount of income during that time.
Salon owners believed the losses would be covered by their company’s business insurance policy, which includes a business interruption provision, they said. So, when Beach Glo was cleared to reopen, they filed a loss of income claim.
That claim was reportedly denied in July because the salon’s policy contains a “virus exception” that says the insurance company “will not pay for loss or damage cause by or resulting from any virus, bacterium or other micro-organism that induces or is capable of inducing physical distress, illness or disease,” according to the owners.
Beach Glo insists its loss of business was not a direct result of COVID-19, but instead a result of the government’s shutdown order. The company filed a class action lawsuit against its insurers – Nationwide Mutual Insurance Company and Scottsdale Insurance Company, a Nationwide subsidiary – in U.S. District Court in New Jersey on Oct. 5.
The tanning salon is seeking court approval to represent an unspecified number of other businesses who have similarly been denied loss claims under their insurance policy’s business interruption provision. The proposed Class Members would come from any state that was subject to business restrictions during the pandemic.
Tens of thousands of businesses were forced to close their doors for weeks, if not months, when the governors of several states ordered mandatory lockdowns to prevent the spread of the coronavirus pandemic starting in March.
“Scottsdale and its parent company, Nationwide … used a time of international crisis to blatantly cheat the plaintiff out of money owed to it by issuing blanket denials to valid insurance claims,” the class action lawsuit says.
Beach Glo and its lawyers say the tanning studio had an active and up-to-date full coverage “all-risk” business insurance policy that was to provide compensation for “business interruption … which, generally speaking, would indemnify [the] plaintiff for lost income and profits in the event that its business was shut down.”
The policy was also designed to include “civil authority coverage for business income [that] will begin 72 hours after the time of the first action of civil authority that prohibits access to the … premises and will apply for a period of up to four consecutive weeks.”
Because the salon’s owners were unable to use the salon for its intended purpose – to serve customers and generate income – they suffered “a direct physical loss and damage to their property,” the class action lawsuit claims.
Scottsdale and Nationwide denied Beach Glo’s insurance claim on July 7, saying the company’s losses were caused by a virus, and therefore, excluded from coverage in keeping with the virus exemption, the class action lawsuit says.
The plaintiffs claim Scottsdale and Nationwide have made it a practice to hand down denials based on the virus exemption to many of its clients, which is why the salon owners are seeking certification for a class action lawsuit.
Beach Glo and its lawyers are asking the federal court to decide that the loss of income was a result of the government shutdown orders, not the coronavirus, and to find that Scottsdale and Nationwide are in breach of contract in denying its claims.
They are also accusing the insurance companies of violating state consumer protection laws against fraud and of unjust enrichment – meaning they profited at the expense of the business without providing their clients just compensation.
Was your business shut down by government order during the early days of the coronavirus pandemic? Have you been denied a claim for loss of income under your insurance policy’s business interruption provision? Tell us about it in the comment section below.
Beach Glo Tanning Studio and the proposed Class Members are represented by Kevin P. Roddy and Joshua S. Kincannon of Wilentz, Goldman & Spitzer, P.A.; Luke Montgomery and Brad Ponder of Montgomery Ponder LLC; and Brian L. Kinsley of Crumley Roberts.
The New Jersey Tanning Salon Business Interruption Class Action Lawsuit is Beach Glo Tanning Studio Inc., et al. v. Scottsdale Insurance Company, et al., Case No. 3:20-cv-13901, in the U.S. District Court for the District of New Jersey.
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