Kat Bryant  |  May 18, 2020

Category: Covid-19

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kid boutique closed due to coronavirus

A San Francisco retailer is bringing a proposed class action against Travelers for failing to honor business interruption insurance claims for the COVID-19 shutdown.

In mid-March, as part of his “Safer at Home” order, California Gov. Gavin Newsom mandated that businesses statewide temporarily cease in-person customer interactions, except for curbside and delivery services.

Mudpie, a San Francisco seller of high-end children’s clothing and other goods, complied with that order and is suffering substantial losses as a result, according to the lawsuit.

The business operators believed they were prepared for such circumstances, having purchased comprehensive business insurance from Travelers.

Mudpie’s business interruption coverage reportedly includes losses attributable to “civil authority.” The policy has remained in force with premium payments kept current, the filing states.

In late April, the plaintiff submitted a claim under that business interruption insurance policy; but on May 6, Travelers denied it via what the plaintiff believes was “a form letter sent in response to business interruption claims arising from California’s Stay at Home orders.”

In that letter, the lawsuit reports, “Travelers took the position that ‘[b]ecause the limitations on your business operations were the result of the Governmental Order, as opposed to direct physical loss or damage to property at the described premises … this Business Income and Extra Expense coverage does not apply to your loss.’ Although Mudpie’s policy also included civil authority coverage and while Travelers acknowledged that a civil authority had prohibited access to Mudpie’s premises, it stated that ‘the Governmental Order that affected your business was not issued due to ‘direct physical loss of or damage to property.’ Travelers further stated that the policy included ‘an exclusion for loss or damage caused by or resulting from any virus’ — such as the COVID-19 virus.”

If your business had to scale back or shut down temporarily because of COVID-19 restrictions, and your business interruption insurance provider refuses to cover it, click here to participate in an investigation.

“Applicable law construes ambiguity in favor of coverage, and narrowly construes exclusions, the applicability of which insurers have the burden of proving,” the business interruption lawsuit argues. “Travelers’ denial of coverage breached its obligation and responsibility to provide coverage available through the policy to Plaintiff due to its covered loss of business income because its premises are unusable and uninhabitable and have lost all function.”

Without benefit of the business insurance Travelers promised, Mudpie and other retailers in the same predicament will continue to suffer and may not survive under the current conditions, the lawsuit maintains.

“As a result of the Stay at Home orders, Plaintiff has incurred and continues to incur a substantial loss of business income and additional expenses covered under the policy,” the filing states.

Plaintiff is suing on behalf of itself and other California retailers who were denied Travelers business interruption insurance claims. They “reasonably believed they had comprehensive coverage that would apply to business interruptions under circumstances like these, where they have done everything right to protect their businesses and the public,” the lawsuit alleges. “But insurance companies like Travelers are cutting those lifelines — despite having pocketed significant premiums for such relief.”

For a guide to legal issues arising from the coronavirus pandemic, click here.

“Form letters denying coverage for such losses appear to rest on crabbed readings of coverage language and overbroad readings of exclusions,” according to the filing. “That gets insurance law exactly backwards—and raises the specter of bad-faith denials.”

The Travelers lawsuit claims breach of contract and breach of implied covenant of good faith and fair dealing. The plaintiff is seeking a court order affirming that “its business income losses are covered and not precluded by exclusions or other limitations in its comprehensive business insurance policy.”

A california business closed over the coronavirus has been denied a business interruption insurance claimMudpie also hopes to receive the business interruption insurance money that is allegedly owed, plus damages and court costs.

Several related legal actions also are under way, according to an article in California Apparel News. “This is one of many lawsuits we are preparing to file on behalf of small business owners who have been broadly refused coverage by major insurance companies,” said a representative for the plaintiff.

The plaintiff is represented by Eric H. Gibbs, Andre M. Mura, Karen Barth Menzies, Amy M. Zeman and Steve Lopez, all of Gibbs Law Group; and Andrew N. Friedman, Victoria S. Nugent, Julie Selesnick, Geoffrey Graber, Eric Kafka and Karina G. Puttieva, all of Cohen Milstein Sellers and Toll PLLC.

The Travelers Class Action Lawsuit is Mudpie Inc. v. Travelers Casualty Insurance Co. of America, Case No. 3:20-cv-03213, in the U.S. District Court for the Northern District of California.

Do YOU have a legal claim? Fill out the form on this page now for a free, immediate, and confidential case evaluation. The attorneys who work with Top Class Actions will contact you if you qualify to let you know if an individual Coronavirus business interruption lawsuit or class action lawsuit is best for you. [In general, business interruption lawsuits are filed individually by each plaintiff and are not class actions.] Hurry — statutes of limitations may apply.

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