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COVID-19 business interruption suit against Starr unit can proceed

Posted On: Dec. 3, 2020 5:36 PM CST

Las Vegas

A Nevada state court has refused to dismiss COVID-19 business interruption litigation filed by a Las Vegas commercial real estate operator and owner against a Starr Insurance Cos. unit.

JGB Vegas Retail Lessee LLC, which owns the Grand Bazaar Shops — a large, open-air mall with more than 35 restaurants and shops located on the Las Vegas Strip — filed suit against Starr Surplus Lines Insurance Co. on charges including breach of contract and breach of the covenant of good faith and fair dealing for its refusal to pay business interruption losses in connection with the state-ordered closings of its operations, according to court papers in JGB Vegas Retail Lessee, LLC v. Starr Surplus Lines Insurance Co.

JGB alleges that it was “highly likely that the novel coronavirus that causes COVID-19 has been present on the premises of the Grand Bazaar Shops, thus damaging the property JGB had leased to its tenants,” Monday’s ruling said.

“The Court finds that JGB’s complaint sufficiently alleges losses stemming from the direct physical loss and/or damage to property from COVID-19 to trigger Starr’s obligations under the property and TIME ELEMENT coverage provisions in the Policy, including coverage for general business interruption and Interruption by Civil or Military authority,” the ruling said. 

The court also refused to dismiss JGB’s claim for breach of contract and related claims on the basis that any loss or damage it sustained did not fall under the policy’s pollution and contamination exclusion.

“Starr has not shown that it is unreasonable to interpret the Pollution and Contamination Exclusion to apply only to instances of traditional environmental and industrial pollution and contamination that is not at issue here, where JGB’s losses are alleged to be the result of a naturally occurring, communicable disease. This is the case, even though the Exclusion contains the word ‘virus,’” the ruling said.

The court also did not dismiss JGB’s charge that Starr had violated the Nevada Unfair Claims Practices Act and its breach of the implied covenant of good faith charge.

JGB’s attorneys had no comment while Starr did not respond to a request for comment.

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