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A group of about 50 New York restaurants, ranging from high-end dining establishments to an iconic bagel shop, are suing their insurers for hundreds of millions of dollars in damages in a suit alleging their coronavirus-related business interruption claims were wrongly denied.
The restaurants assert they sustained direct physical losses from the pandemic and had to partially reconstruct their properties to adapt to serving customers under restrictive reopening rules.
The suit filed by law firm Jenner & Block LLP in state court in Brooklyn on Monday lists 27 insurers as defendants, including units of major commercial property insurers such as American International Group Inc., Chubb Ltd., Travelers Cos. Inc. and Zurich Insurance Group Ltd.
The plaintiffs in the suit, Abruzzo Docg Inc. d/b/a Tarallucci e Vino et al v. Acceptance Indemnity Insurance Co. et al, include Danny Meyer’s Union Square Café, the Grand Central Oyster Bar, Café Wha? and Ess-a-Bagel.
A similar suit, Lettuce Entertain You Enterprises Inc. et al v. Employers Insurance Co. of Wausau et al, was filed in state court in Chicago on Friday.
“Our clients suffered direct physical loss and damage — and hundreds of millions of dollars of losses — as a result of the executive shutdown orders,” said Gabriel K. Gillett, a Chicago-based partner at Jenner & Block, in a statement.
The restaurants argue that they are owed coverage under all-risk commercial property policies issued by the various insurers for income lost and extra expenses incurred during forced closures and restricted reopening during the COVID-19 pandemic.
Among other things, government-imposed restrictions required the restaurants to make physical alterations when they reopened, the suit alleges.
“They had to physically manipulate tables, chairs, and other equipment into less functional arrangements; install plexiglass or other makeshift barriers to prevent congregation; place markers on the floor or walls to indicate six-feet of separation; and redesign routes for entrance and exit,” the suit states.
In addition, the restrictions limit the number of customers who can be served, the suit states.
The insurers denied claims on the grounds that the policies require “direct physical loss of” or “damage to” the restaurants to trigger business interruption coverage, the suit states.
“But there is no language in any of the Policies requiring this narrow construction. Under any reasonable interpretation, the terms ‘direct physical loss of’ or ‘damage to’ property are much broader and would include detrimental physical effects, like those caused by the Shutdown and Partial Reopening Executive Orders,” court papers say.
Scores of restaurants across the United States have sued their insurers in state and federal courts seeking business interruption coverage for COVID-19 losses, but most of the previous suits have been filed by individual businesses or much smaller groups.
The few rulings made so far on the issue have favored insurers.
Insurers argue that many of the policies contain exclusions for viruses and communicable diseases. One of the few cases that included a policy that offered coverage for named viruses, which was issued by insurers at Lloyd’s of London, was settled in June.
More insurance and risk management news on the coronavirus crisis here.