A New Jersey restaurant launched a class action lawsuit against its insurance company, challenging the insurer’s refusal to cover COVID-19 business losses.

The New Jersey COVID-19 insurance class action lawsuit was filed by Benito Ristorante against Indemnity Insurance Company, which is a subsidiary of Chubb LTD, a Swiss corporation.

Benito reportedly had a business insurance policy through Indemnity, for coverage between Aug. 1, 2019 and Aug 1, 2020.

Though the plan covered business losses, Benito claims that Indemnity wrongly refused to cover losses related to the current pandemic.

Benito explains that they have already paid the policy premiums to Indemnity and Chubb, to provide coverage for “lost business income and extra expenses in the event of an involuntary business interruption.”

In their COVID-19 coverage class action lawsuit, the restaurant explains that the spring of 2020 is characterized by a worldwide outbreak of a novel form of coronavirus, which can cause respiratory problems. Benito notes that the virus spreads easily and can be fatal, but there is no vaccine or cure. This means that the best defense against the virus to slow its spread is through the use of protective measures and social distancing.

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This has had a profound affect on restaurants, which were some of the first business to have to close or change their operations, as states around the country implemented social distancing requirements and stay-at-home orders, explains Benito.

Allegedly, restaurants present a severe risk of secondary exposure to the virus — humans can become exposed to the virus by touching a surface that has the virus on it. In Benito’s words, “the secondary exposure of the surface to humans is particularly acute in places where the public gathers typically to socialize, eat, drink, shop, be entertained, and go for recreation.”

The NJ COVID-19 business closure class action lawsuit says that Benito was severely affected by COVID-19 business closures, because of its role as a restaurant subject to closures, and its location in New Jersey, which was one of the first states to declare a state of emergency.

Benito says that because of closures and reductions in business caused by the coronavirus outbreak, the restaurant has suffered real business loss that should have been covered under its insurance policy with Chubb.

The plaintiff explains that the insurance policy in question is an “all risk” commercial property policy, covering loss or damage resulting from all risks other than risks specially excluded.

According to Benito’s insurance class action lawsuit, the insurance policy does include an exclusion for loss or damage “caused by or resulting from any virus, bacterium, or other microorganism that induces or is capable of inducing physical distress, illness, or disease.”

However, Benito asserts that they are seeking coverage for business interruption, because they have not been able to use their property for its intended purpose.

Allegedly, the virus exclusion does not apply in Benito’s case, because the damage to the property was not caused by a virus itself.

The damage was reportedly caused by precautionary measures to prevent the spread of a virus. Effectively, the State of New Jersey’s business closures and precautionary measures were the root of the restaurant’s business interruption and loss, says Benito.

However, the insurer reportedly notified Benito and other policyholders that business interruption caused by government-mandated closures would not be covered.

Benito says that their claim was denied because the insurer alleged that the restaurant failed to prove the business had suffered physical loss or damage. However, the restaurant claims that case law holds that a policyholder can claim “physical loss or damage” even if a property has not been physically altered.

According to the restaurant, if the defendant had wanted to create an exclusion that determined that “physical loss or damage” to the property would not be covered if the property had not been physically altered, they could have done so. However, because the insurer did not make this exclusion, these losses should be covered.

Benito is represented by James E. Cecchi and Lindsey H. Taylor of Carella Byrne Cecchi Olstein Brody & Agnello PC; Christopher A. Seeger and Stephen A. Weiss of Stephen A. Weiss of Seeger Weiss LLP; and Samuel H. Rudman, Paul J. Geller, and Stuart A. Davidson of Robbins Geller Rudman & Dowd LLP.

The Benito Chubb COVID-19 Business Loss Claim Denial Class Action Lawsuit is Beniak Enterprises INC d/b/a Benito Ristorante v. Chubb Ltd., et al., Case No. 2:20-cv-05536-KM-JBC, in the U.S. District Court for the District of New Jersey.

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