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Law360 (August 21, 2020, 5:14 PM EDT) -- Earl of Sandwich, which owns 30 sandwich restaurants in the U.S., slapped Liberty Mutual Insurance Co. with a proposed class action, asking the insurer to cover its business loss from state-mandated closures and arguing that its policy's virus and pollution exclusions don't apply because COVID-19 was not found on its properties.
JAJ Group Inc., doing business as Earl of Sandwich, told a California federal judge Thursday that Liberty Mutual illegally denied coverage within a week of receiving its loss claim in late April, claiming the insurer failed to conduct a claim investigation required by the policy and that it suffered physical damage because of the pandemic.
"If Liberty Mutual had wished to exclude from coverage as 'physical loss or damage' loss of use of property that has not been physically altered, it could have used explicit language stating such a definition of 'physical loss or damage.' It did not do so," the sandwich chain said.
Earl of Sandwich said it was forced to close entirely because of the government orders in March, claiming the virus exclusion does not preclude coverage for its loss and that the novel coronavirus is not a "pollutant" defined by its policy with Liberty Mutual.
"The efficient proximate cause of losses was precautionary measures taken by the state to prevent the spread of COVID-19 in the future, not because coronavirus was found on or around plaintiff's insured property," the sandwich group said, stressing that neither the policy's virus nor the pollution exclusion bars coverages.
Earl of Sandwich is seeking to represent a nationwide class and a California subclass of all Liberty Mutual commercial property policyholders. In the complaint, it cited media reports that the U.S. property-casualty insurance industry has about $800 billion in surplus, and that Liberty Mutual collected over $35.6 billion in property insurance premiums in 2018 alone.
"Although industry trade groups have argued that insurance companies do not have the funds to pay claims related to the coronavirus and will require government assistance, the reality is that insurers are simply trying to minimize their exposure," the sandwich group said.
Earl of Sandwich contended that its policy does not contain a pandemic exclusion, so its losses from forced closures because of government response to COVID-19 should be covered. Liberty Mutual's "immoral" and "unconscionable" issuing "systematic and blanket" refusals to business interruption claims reflect its true goal of "minimizing payments by any means necessary," the group said.
The sandwich chain is asking the court to hold that Liberty Mutual should pay for the proposed class members' business interruption losses, and demanding damages and other relief to be determined in a jury trial as well as attorney fees.
Representatives for parties could not be immediately reached for comment.
Earl of Sandwich is represented by Amber L. Eck, Alreen Haeggquist, and Robert Prine of Haeggquist & Eck LLP.
Counsel for Liberty Mutual could not be determined.
The case is JAJ Group, Inc. v. Liberty Mutual Insurance Company, case number 3:20-cv-01620, in the U.S. District Court for the Southern District of California
--Editing by Amy Rowe.
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