Law360 (August 10, 2020, 2:53 PM EDT) -- Ralph Lauren Corp. has sued Factory Mutual Insurance Co., seeking full coverage under its $700 million policy after its wholesale revenue dropped 93% from the year before due to COVID-19, alleging that the insurer is wrongfully limiting its coverage to "communicable disease."
The fashion giant alleged Friday that Factory Mutual has "fraudulently" investigated and "wrongfully shoehorned" its claim into a small sublimit of coverage while defrauding its policyholders, including Ralph Lauren, of the full coverage that it is obligated to pay.
Ralph Lauren said that the pandemic has forced its global stores to shut down and caused the complete closure of its U.S. stores. The company said that, despite efforts to sell online, its revenues slid 66% for the first quarter, its North America store sales fell 77%, and its wholesale sales dropped 93% from the previous year.
Ralph Lauren said that before the pandemic, hundreds of thousands of customers visited its stores daily around the world, but since COVID-19, it has incurred substantial damage to its business. The fashion giant claimed that the virus is a deadly communicable disease that causes direct physical damage and triggers civil authority coverage under its "all-risk" policy with Factory Mutual.
The company filed its claim on March 30, and has been told by Factory Mutual that coverage for COVID-19 is barred by the policy's "contamination" exclusion, since the virus does not cause physical damage, and the policy will only potentially pay for "removal" costs of communicable diseases.
Steve Zenofsky, a spokesperson for FM Global, the parent company for Factory Mutual, said in an email Monday that "FM Global is unable to discuss the topic in the news media because of the legal nature of the matter."
In the complaint, Ralph Lauren said that although the policy defines contamination as a virus, it does not exclude coverage for loss caused by communicable disease and that Ralph Lauren's claim is based on the direct physical loss caused by COVID-19, a communicable disease, and the state-mandated orders instead of contamination.
The fashion giant said since the policy terms are ambiguous and susceptible to more than one reasonable interpretation, it must be read in favor of coverage for the policyholder.
The company is alleging breach of contract and violation of the New Jersey Consumer Fraud Act, contending that because of Factory Mutual's "unconscionable commercial and/or deceptive acts," it has been suffering an "ascertainable loss."
Ralph Lauren said that while Factory Mutual was "soliciting" it to buy the policy in 2019, it "touted market-leading claims service," and claimed to "focus on finding coverage instead of exclusions" and providing "fair and prompt payment of losses."
The fashion giant is asking the court to hold that it is entitled to the full $700 million coverage under the Factory Mutual policy, that the policy's exclusions do not apply, and that COVID-19 did create a physical loss on its property. It is seeking damages to be determined in a jury trial as well as attorney fees.
Ralph Lauren and its counsel did not immediately respond to requests for comment.
Ralph Lauren is represented by Kevin V. Small, Walter J. Andrews, Michael S. Levine and Matthew J. Revis of Hunton Andrews Kurth LLP.
The case is Ralph Lauren Corp. v. Factory Mutual Insurance Co., case number 2:20-cv-10167, in the U.S. District Court for the District of New Jersey.
--Editing by Alyssa Miller.
For a reprint of this article, please contact firstname.lastname@example.org.