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Radiology group cites ‘sue and labor’ clause in virus suit


A radiology practice sued its insurer Wednesday claiming it was owed coverage for coronavirus-related losses under the “sue and labor” clause in its policy, among other reasons.

In the proposed class-action lawsuit, Alliance Radiology PA v. CNA Financial Corp., the Kansas City, Missouri-based 28-physician practice says it lost business after it was forced to stop nonemergency procedures to comply with government-ordered shutdowns imposed after the coronavirus outbreak.

In the suit filed in federal court in Kansas City, Alliance Radiology says its policy does not contain a virus exclusion and argues that the virus constitutes physical damage, which should trigger coverage under the policy.

In addition, the suit says the sue and labor clause in its policy requires it to take steps to protect its property from further damage.

“Plaintiff has taken such steps by, for example, complying with Stay-at-Home Orders,” the suit says.

CNA did not respond to a request for comment.

The sue and labor clause dates to marine policies that were designed to pay for the costs of, for example, cargo that had been jettisoned to prevent a foundering ship from sinking.

Twenty years ago, several large policyholders cited the sue and labor clause in coverage battles with insurers over remediation costs for the Y2K computer bug. Many of the policyholders later dropped the suits, and courts ruled against the policyholders in other cases.

The Alliance Radiology suit is one of dozens of suits filed by policyholders against insurers seeking business interruption coverage for enforced business closures during the COVID-19 pandemic. Many of the suits have been filed by restaurants and other service industry companies, but the categories of businesses filing suits have broadened over the past two weeks. In addition, a suit filed earlier this week also listed the policyholder’s brokers as defendants. 

Also this week, two auto dealers sued their insurers in separate COVID-19 suits.

In the lawsuit Geneva Foreign & Sports Inc. v Erie Insurance Co. of New York, filed in federal court in Erie, Pennsylvania, the Geneva, New York-based dealership says its policy does not contain a virus exclusion, the virus constitutes physical damage to its property, and that the government-ordered lockdown triggers coverage under the civil authority section of its policy.

In the lawsuit Bowser Automotive v. Chubb Group of Insurance Cos., filed in state court in Pittsburgh, the Pleasant Hills, Pennsylvania-based dealership also argues that the virus constitutes physical damage and that it is owed coverage.

Erie Insurance and Chubb have previously stated that they don’t comment on pending litigation.

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