Theater chain sues for virus cover under pandemic endorsement

A Sugar Land, Texas-based dine-in movie theater chain is suing Lloyd’s of London underwriters for coronavirus-related losses under the pandemic event endorsement in its business interruption coverage.

According to the suit filed in U.S. District Court in Houston on Friday, the insurers last month indicated that coronavirus claims would not be covered under the policy because it was not one of the named diseases listed in the endorsement, which provides up to $1 million in coverage.

In the case, SCGM Inc. v. Certain Underwriters at Lloyd’s, the movie theater chain said Lloyd’s began marketing its pandemic endorsement after the 2014 Ebola crisis when other insurers excluded communicable disease coverage.

“In exchange for a significant premium paid by the insured, Lloyd’s Pandemic Event Endorsement purported to provide coverage for insureds who experience financial damages from business interruption during pandemic,” court papers say.

SCGM added the endorsement to its business interruption coverage last June, the suit states.

SCGM closed its operations on March 17 after restaurants in the Houston area were ordered to offer only carry-out services. On March 19, Texas authorities imposed severe restrictions on public gatherings to try to slow the spread of the coronavirus, court papers say.

SCGM notified Lloyd’s of its business interruption claims on March 18 and received a response the same day stating that COVID-19 “is not covered under the Pandemic Event Endorsement as it is not a named disease on that endorsement,” the suit states.

According to the policy wording included in court documents, the endorsement covers 25 named diseases, and their mutations and variations, ranging from avian flu to zika, including “Severe Acute Respiratory Syndrome-associated Coronavirus (SARS-CoV) disease.”

According to the suit “SARS-CoV-2 is the causative virus for the COVID-19 disease implicated in the ongoing 2019–2020 coronavirus pandemic.”

SCGM is seeking a declaratory judgment that its business interruption losses related to the coronavirus are covered under the policy.

Lloyd’s could not immediately be reached for comment.

More insurance and risk management news on the coronavirus crisis here.