{"id":897334,"date":"2020-04-14T12:10:54","date_gmt":"2020-04-14T18:10:54","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=897334"},"modified":"2020-04-14T12:10:57","modified_gmt":"2020-04-14T18:10:57","slug":"bad-faith-trend-emerges-in-covid-19","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/bad-faith-trend-emerges-in-covid-19\/","title":{"rendered":"A New Bad Faith Trend Emerges in COVID-19 Business Interruption Litigation"},"content":{"rendered":"\n

Gregory Gidus | Property Casualty Focus<\/a><\/p>\n\n\n\n

With governments across the world ordering the shutdown of restaurants, bars, and other \u201cnon-essential\u201d businesses due to the COVID-19 pandemic, business interruption insurance claims are, not surprisingly, on the rise. While typical commercial property policies require \u201cdirect physical loss or damage\u201d to property \u2014\u00a0a requirement that is unlikely satisfied by the shutdowns\u00a0\u2014 policyholders are getting creative, alleging that the potential presence of the novel coronavirus on the surfaces of their premises is direct physical damage. Unconvinced, insurers are denying these claims, in many instances without further investigation or inspection of the insured premises. As these disputes make their way into the courts, a new trend is beginning to emerge \u2014 in addition to seeking coverage for their losses, insureds are including counts for bad faith premised on the insurers\u2019 purported failure to reasonably investigate the COVID-19 claims.<\/p>\n\n\n\n

One such case,\u00a0Big Onion Tavern Group LLC vs. Society Insurance Inc.<\/em>, was filed by several Chicago restaurants in the Northern District of Illinois on March 27, 2020. In addition to seeking a declaration that their losses due to the shutdown were covered by their commercial property policies, the plaintiffs also assert that Society acted in bad faith by immediately denying the claims \u201cwithout conducting any investigation, let alone a \u2018reasonable investigation based on all available information\u2019 as required under Illinois law.\u201d In support, the plaintiffs attached a message from Society\u2019s CEO and president to Society\u2019s agents, stating that COVID-19 claims were unlikely to result in business interruption coverage. According to the plaintiffs, this message supports their theory that Society blanketly denied their claims \u201cwithout conducting reasonable investigations based on all available information.\u201d<\/p>\n\n\n\n

Similar allegations were made in\u00a0Mace Marine Inc. v. Tokio Marine Specialty Insurance Co.<\/em>, filed in Monroe County, Florida, on April 6, 2020. The insured in\u00a0Mace Marine<\/em>, a Florida Keys dive shop, asserted that it suffered direct physical loss or damage to property due to the potential presence of the coronavirus on its premises, but its claim was denied. The insured subsequently sued the insurer seeking coverage and also brought a statutory bad faith claim. According to the policyholder, the insurer acted in bad faith because it \u201cformally denied the claim on March 30, 2020 without conducting any substantive investigation into the claim. The insurance company did not attempt to inspect the premises, nor did they request any photographs or send out any experts or field adjusters to evaluate the claim.\u201d The insured contends that these actions constituted \u201cwillful, wanton, immoral, unlawful, malicious and\/or deceptive claims handling practices.\u201d<\/p>\n\n\n\n

A third suit<\/a> alleging bad faith as a result of a COVID-19 denial was brought in Harris County, Texas, alleging that the insured acted in bad faith by failing to conduct \u201ca reasonable, full and fair claim investigation.\u201d<\/p>\n\n\n\n

These suits, all of which are in their nascent stages, will likely present similar legal issues:<\/p>\n\n\n\n