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Eye center’s bad faith claim against CNA unit can proceed


A federal district court in New Mexico ruled an eye center was not entitled to COVID-19 business interruption coverage under a policy issued by a CNA Financial Corp. unit but said a bad faith claim against the insurer can proceed.

Albuquerque Ambulatory Eye Surgery Center LLC filed suit against CNA unit Transportation Insurance Co. after it refused the center’s claim for coverage under its all-risk commercial property policy, according to Tuesday’s ruling by the U.S. District Court in Albuquerque, New Mexico, in Albuquerque Ambulatory Eye Surgery Center LLC v. Transportation Insurance Co.

Charges against the insurer included breach of duty of good faith and fair dealing.

The court held the center sustained no direct physical loss as required by its policy and that it is “reasonable to conclude the allegations of the presence of coronavirus in the insured premises, alone, are insufficient to trigger coverage under the Policy.”

But the court said the center’s bad faith claim could proceed.  “Here, Plaintiff plausibly alleges that Defendant failed to fairly investigate the claim,” the ruling said.

 “Plaintiff alleges that Defendant ‘did not follow up with its insured, request an interview, or visit the covered location. (Defendant) also failed to review ample publicly available and easily accessible information regarding (the claim),’” the ruling said in refusing to dismiss the bad faith charge.

Attorneys in the case did not respond to requests for comment.