A large restaurant chain that owns and operates 34 restaurants in Massachusetts, the District of Columbia, New Jersey, Pennsylvania, Rhode Island, and Virginia is suing its insurer, Strathmore Insurance, over its denied business interruption claims [Source: Insurance Journal]. After the COVID-19 pandemic shuttered the business, causing profits to take a steep dip, the owner turned to its insurer it recently purchased a policy from for coverage. The restaurant chain’s insurer responded to the request for help with a denial letter.
According to the denial notice, the insurer says that it was Legal Sea Foods’ decision to shutter some or all of its restaurants, “rather than any government closure order.” The insurer goes on to say that “financial loss due to an on-premises dining ban is excluded by the policy’s ordinance or law provision that provides that it will not pay for loss caused directly or indirectly by the enforcement of any ordinance or law regulating the use of any property.” Strathmore also claimed that Legal Sea Foods “did not suffer any direct physical loss or damage to property as required,” the argument most insurance companies across the nation are using to deny business owners the business interruption coverage they paid for.
Although Strathmore did acknowledge that the restaurant chain suffered some food spoilage, it said that the owner did not have coverage that extended to this as it “was not caused by a change in temperature caused by a mechanical breakdown or by refrigerant contamination.”
Legal Sea Foods Seeks Declaration from the Court Over Denied Claims
In response to having two claims denied, the owner of Legal Sea Foods decided to turn to the courts for help. In the lawsuit, the chain seeks a declaration from the court “that the policy covers its claim and no exclusion applies to bar or limit coverage for its claim.” The chain owner acknowledged that its policy insures against “all risks of loss of or damage to property and ensuing business interruption and extra expense, unless specifically excluded or limited in the policy.” The policy also “provides business income and extra expense coverage, subject to a blanket limit of $94,852,397.”
Although the policy was issued on March 1, 2020 “when the coronavirus was already raging,” Legal Sea Foods alleges that Strathmore did not include in its policy any exclusions for pandemics.
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