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Aerospace products firm sues insurer for coronavirus coverage


A titanium products manufacturer for the commercial and military aerospace industry sued its insurer in federal court Monday seeking coverage for business income losses related to the COVID-19 pandemic.

The suit against Selective Insurance Group Inc. is one of dozens of business interruption suits filed in courts across the country, but most of the other suits have been filed by companies operating in service industries, such as restaurants and theaters. A clothing retailer, represented by the same law firm, filed a similar suit against Selective on Tuesday.

In the suit C.A. Spalding Co. v. Selective Insurance Group Inc., filed in federal court in Philadelphia, the Bensalem, Pennsylvania-based aerospace manufacturer said it closed its operations in late March, furloughing 41 employees, after state authorities closed nonessential businesses in an effort to stem the spread of the coronavirus. On its website the company lists various clients, including Boeing Co., Lockheed Martin Corp. and the U.S. Navy.

“Plaintiff’s business is not a closed environment, and because people – staff, customers, community members, and others – cycle in and out of the facility, there is an ever-present risk that the Insured Property is contaminated and would continue to be contaminated,” court papers say.

C.A. Spalding’s business interruption policy includes a virus exclusion, but coverage should still apply because it is triggered under the civil authority portion of the policy, which applies to mandated closures, the suit says.

“The virus is physically impacting Spalding. Any effort by the Defendant to deny the reality that the virus causes physical loss and damage would constitute a false and potentially fraudulent misrepresentation that could endanger the Plaintiff and the public,” the suit states.

On Tuesday, Branchville, New Jersey-based Selective was sued in the same court by a clothing retailer, which also seeks a declaratory ruling affirming business interruption coverage and is represented by the same law firm as the manufacturing company, Levin Sedran & Berman LLP in Philadelphia.

In Jul-Bur Associates and Julie’s Bottega v. Selective Insurance Co. of America, the Bala Cynwyd, Pennsylvania-based clothing store also argues that the virus exclusion in its policy does not bar coverage because its losses should be covered under the civil authority portion of its policy.

Both of the suits cite a Pennsylvania Supreme Court decision earlier this month that ruled that the government had the authority to close businesses during catastrophes. The high court’s ruling referenced a Pennsylvania law listing various natural disasters that involve “substantial damage to property, hardship, suffering or possible loss of life.”

The ruling states: “In this respect, the COVID-19 pandemic is of the ‘same general nature or class as those specifically enumerated,’ and thus is included, rather than excluded, as a type of ‘natural disaster.’”

Selective did not immediately respond to a request for comment.

Insurers and insurer groups have argued that COVID-19 is excluded under virus exclusions in many business interruption policies and even where exclusions don’t appear the government-ordered closure of a business does not constitute physical damage.

Travelers Cos. Inc. filed a counter suit against two of its policyholders this week seeking a declaratory ruling on the issue.  

In Chubb Ltd.’s first-quarter earnings call on Wednesday, Evan Greenberg, the insurer’s chairman and CEO, said the insurance industry would fight the business interruption suits “tooth and nail.”

Two Chubb policyholders filed proposed class actions against the insurer this week.

More insurance and risk management news on the coronavirus crisis here