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Law360 (October 5, 2020, 6:07 PM EDT) -- A New Jersey tanning salon launched a proposed class action Monday accusing Nationwide Mutual Insurance Co. and a subsidiary of improperly denying claims stemming from the COVID-19 pandemic, saying the losses should be covered under its policy's business interruption provision.
Beach Glo Tanning Studio Inc. of Point Pleasant wants a declaration that the loss-of-income coverage provided in the company's standard commercial policies applies to the pandemic, citing the millions of dollars that tanning salons pay in premiums. Beach Glo, which got a claim denial letter in July, names Nationwide and Scottsdale Insurance Co. as defendants.
The salon says that New Jersey Gov. Phil Murphy's March order for nonessential businesses to close translates to a property loss with respect to its policy's language, and that the policy's virus exclusion shouldn't apply because its loss was caused by a government mandate, not the coronavirus.
Salons have since been permitted to reopen in New Jersey and elsewhere. However, the insurers "used a time of international crisis to blatantly cheat the plaintiff out of money owed to it by issuing blanket denials to valid insurance claims," the complaint says.
The salon has a full coverage policy that provides for, among other things, loss of business income to the "necessary suspension" of operations, the complaint says. The suspension must be caused by a "direct physical loss," according to the policy language included in the complaint.
That coverage, along with the policy's coverage for losses relating to the "action of a civil authority that prohibits access" to the premises, should have resulted in the salon's claims being accepted, the complaint says.
"Plaintiffs and the members of the class have suffered a direct physical property loss of and damage to their property because they have been unable to use their property for its intended purpose," the complaint says.
The salon went on to say that the virus exclusion is ambiguous because it's unclear if the related losses are covered.
The policy excludes loss or damage due to "a virus, bacterium or other microorganism" that induces or is capable of causing illness, the complaint says. But the salon's position is that the exclusion shouldn't apply because the "sole proximate cause" of the salon's loss was the closure order.
The salon wants to represent a multistate class and a New Jersey subclass. The complaint lodges breach of contract claims and accuses the defendants of unjust enrichment and of violating the New Jersey Consumer Fraud Act.
Representatives for the parties didn't immediately respond to requests for comment.
Beach Glo is represented by Kevin P. Roddy and Joshua S. Kincannon of Wilentz Goldman & Spitzer PA, Luke Montgomery and Brad Ponder of Montgomery Ponder LLC and Brian Kinsley of Crumley Roberts.
Counsel information for the defendants was unavailable.
The case is Beach Glo Tanning Studio Inc. v. Scottsdale Insurance Co. et al., case no.3:20-cv-13901, in U.S. District Court for the District of New Jersey.
--Editing by Haylee Pearl.
For a reprint of this article, please contact reprints@law360.com.
