Brigette Honaker  |  April 16, 2020

Category: Covid-19

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Empty movie theater with Lloy'd insurance

Lloyd’s insurance underwriters have been accused of wrongfully denying a business interruption insurance claim by a Texas movie theater owner.

The Lloyd’s insurance lawsuit was filed by SCGM Inc., a company which operates a group of movie theaters including Star Cinema Grill and Hollywood Palms Cinema.

According to SCGM, the insurance company refused to pay on a $1 million business interruption policy despite the consequences of the coronavirus pandemic.

Lloyd’s insurance writers have reportedly refused to provide coverage during the outbreak despite a “pandemic event endorsement” which policyholders pay more for.

The movie theater owner says that Lloyd’s began to market their pandemic endorsement after the 2014 Ebola outbreak. Allegedly, advertising for the endorsement promised consumers that this coverage would help compensate for exclusions used by other insurance companies.

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However, Lloyd’s insurance has allegedly refused to honor this endorsement and instead denies claims related to the COVID-19 outbreak.

“On its face, Lloyd’s conduct appears to be nothing more than an attempt to put insureds in a position where they will be forced to accept lowball settlement offers simply from the fear that their insurer will drag out proceedings well past the insured’s ability to remain financially viable,” the Lloyd’s insurance lawsuit argues.

SCGM reportedly contacted Lloyd’s insurance following business shutdown orders from state and local officials. However, when SCGM sought coverage under their $1 million business interruption policy, the insurance provider allegedly refused to provide payment.

Lloyd’s insurance reportedly told the movie theater owner that COVID-19 was not covered by the pandemic endorsement, because it was not specifically included in the endorsement terms.

Although the endorsement names a variety of specific pathogens, SCGM argues that the terms of the endorsement also include “mutations or variations” of “Severe Acute Respiratory Syndrome-associated coronavirus [SARS-CoV].” COVID-19 is reportedly a variation of SARS-CoV, which allegedly ensures that related claims should be paid.

Despite these terms, Lloyd’s refused coverage to SCGM and others in either an unreasonable “knee-jerk reaction” or an “in internal, high-level directive to automatically deny all pandemic-related business-interruption-claims.”

SCGM further alleges that Lloyd’s insurance underwriters did not take the time to investigate the claim – evidenced by the fact that it took only a few days for the company to return a decision to SCGM.

“Lloyd’s denial was unreasonable and reflects a failure to adequately and reasonably investigate and evaluate Plaintiff’s claim, even though Lloyd’s knew, or should have known by the exercise of reasonable diligence, that its liability was reasonably clear under the circumstances,” the Lloyd’s insurance lawsuit argues.

According to the movie theater owner, Lloyd’s failure to pay the business interruption claims is not only unfair but will also lead to significant damages. These damages will allegedly exceed the limits of the $1 million policy. The Lloyd’s insurance lawsuit seeks compensation for these damages along with attorneys’ fees and other costs.

“Lloyd’s failure to promptly accept and pay Plaintiff’s claim has caused and will continue to cause direct and consequential damages that in total will likely far exceed the limits of the Policy,” the Lloyd’s insurance class action lawsuit. “Such damages are a direct result of Lloyd’s mishandling of plaintiff’s claims in violation of the law.”

This is not the first Lloyd’s insurance lawsuit against the company. In late March, a New Orleans restaurant filed a similar complaint alleging that they should be issued payments for coronavirus-related business interruptions. Oceana Grill sought a court order directing the company to provide coverage under an “all risk” policy following the Louisiana governor’s public health order.

Lloyd's insurance coverageOther insurance companies have faced similar action. Society Insurance was faced with a lawsuit from several restaurants, taverns, and movie theaters from the Chicago area. According to the plaintiffs, Society Insurance has denied coverage for coronavirus closures in violation of their own policies.

Hartford Fire Insurance also faces a lawsuit from two French restaurants located in California. According to the companies, their “all risk” business interruption insurance should cover COVID-19 closures. However, the restaurants allegedly expected that their claims would be denied by Hartford.

Failure to recover business interruption insurance coverage can result in significant financial harm to businesses. When public health orders shut their doors, businesses are deprived of significant income but are still faced with the expenses of running their company.

SCGM is represented by Michael A. Hawash, Walter J. Cicack, Jeremy Gaston and Jeremy M. Masten of Hawash Cicack & Gaston LLP.

The Business Insurance Denial Lawsuit is SCGM Inc. v. Certain Underwriters at Lloyd’s, Case No. 4:20-cv-01199, in the U.S. District Court for the Southern District of Texas.

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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