Law360 (July 23, 2020, 6:30 PM EDT) -- A hospitality group has hit Hartford Fire Insurance Co. with a proposed class action in Connecticut federal court, saying the company has failed to issue coverage for catastrophic COVID-19 losses that threaten the survival of the group's dine-in restaurants, wine bars and cafes.
New York-based SA Hospitality Group LLC said in its suit filed Wednesday that the group and its 17 subsidiaries have regularly paid premiums for all-risk commercial property insurance with business interruption coverage, but Hartford Fire is now refusing to pay for their lost income even though their policies promise to cover physical loss and damage to property due to measures put in place by civil authorities.
"Plaintiffs and other class members have complied with all applicable provisions of the policies and ... those provisions have been waived by Hartford or Hartford is estopped from asserting them, and yet Hartford has abrogated its insurance coverage obligations pursuant to the policies' clear and unambiguous terms and has wrongfully and illegally refused to provide coverage to which plaintiffs and class members are entitled," according to the complaint.
The SA Hospitality holding company's subsidiaries, which operate a number of restaurants in New York and Florida, are 265 Lafayette Ristorante LLC, 1000 Madison Avenue LLC, Astoria Cakes LLC, Bailey's Restaurant LLC, Cafe Foccacia Inc., Eighty Third And First LLC, Felice Chambers LLC, Felice Gold Street LLC, Felice Water Street LLC, Realtek LLC, SA 61st Management LLC, SA Midtown LLC, SA Special Events Inc., SA Third Ave Cafe LLC, SA York Ave LLC, SABF LLC and SASE LLC.
When the pandemic hit American shores in March, 35 states closed all nonessential businesses with stay-at-home closure orders, and all but one state closed restaurants and bars for services other than takeout and delivery, according to the suit. These closure orders have physically affected private commercial property both in New York and throughout the United States, threatening the survival of thousands of restaurants, the suit said.
Hartford Fire doesn't intend to cover losses caused by the closure orders under its business interruption coverage, even though its policies promise to indemnify SA Hospitality and its subsidiaries' properties due to physical loss or damage or a civil authority's order restricting access to a property, according to the suit.
SA Hospitality said a virus and bacteria exclusion in the policies doesn't apply because the losses suffered by its businesses and other class members were caused by the closure orders and not by what the exclusion terms "a virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease."
"The predominant cause, and thus the efficient proximate cause of plaintiffs', and other class members' losses, were the closure orders, not because coronavirus was found in or on plaintiffs' insured property," the suit said.
However, Hartford Fire sent a letter on April 8 denying the SA Hospitality plaintiffs' claim for business interruption losses, saying their properties had not suffered any direct physical loss and the losses were excluded by the bacteria and virus exclusion, according to the suit.
The action proposes a nationwide class composed of all entities that have signed Hartford Fire all-risk commercial property insurance policies that include business income loss coverage and don't exclude coverage for pandemics. It also proposes a subclass for similar Hartford Fire policies that insure properties in New York.
The action asserts breach of contractual obligation and asks for a court judgment affirming that the civil authority orders trigger coverage, along with a finding that Hartford Fire is liable for the losses suffered by the SA Hospitality policyholders. The plaintiffs seek compensatory damages from Hartford Fire's alleged breach of the insurance policies.
Representatives for the parties did not immediately respond Thursday to requests for comment.
SA Hospitality Group is represented by Christopher A. Seeger, Christopher L. Ayers and Stephen A. Weiss of Seeger Weiss LLP, James E. Cecchi and Lindsey H. Taylor of Carella Byrne Cecchi Olstein Brody & Agnello PC and Samuel H. Rudman, Paul J. Geller and Stuart A. Davidson of Robbins Geller Rudman & Dowd LLP.
Legal counsel information for Hartford Fire was not available.
The case is SA Hospitality Group LLC et al. v. Hartford Fire Insurance Co., case number 3:20-cv-01033, in the U.S. District Court for the District of Connecticut.
--Editing by Jay Jackson Jr.
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