Backers Of Superspreader Event Hotel Sue Insurer For $40M

By Diamond Naga Siu
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Law360 (November 16, 2020, 5:12 PM EST) -- The investor group behind the Boston hotel that hosted the country's first superspreader event has opened a $40 million suit against its insurer in a California federal court, contending that it was wrongly denied coverage of losses related to COVID-19 given its policy's inclusion of virus-related claims.

Sunstone Hotel Investors is the latest in a slew of hospitality-related companies — restaurants, hotels, transportation and more — to file lawsuits against their insurers for rejecting claims related to COVID-19.

The group, however, said its policy with Endurance American Specialty Insurance Company is distinctive since it explicitly covers "biological agent conditions," which the group claims include "viruses and other pathogens."

"Unlike more common property insurance policies, the Endurance policy does not require 'direct physical loss or damage to property' to trigger its coverage and does not exclude loss stemming from a 'virus,'" the investment group said in its Friday filing.

"Endurance's conduct is contemptible and has been done with a conscious disregard of Sunstone's rights, constituting oppression, fraud, and/or malice," the group added.

Sunstone's Marriott Boston Long Wharf property — one of 20 nationwide — was the site of life sciences company Biogen's "superspreader health care event in March, which reportedly accounted for thousands of COVID-19 cases worldwide.

Sunstone claims it paid more than $350,000 in premiums specifically for the policy that covered losses caused by viruses and alleged that Endurance "adopted a corporate-wide and systemic position" to not pay out to parties insured under the policy.

Sunstone's claims are similar to those from other companies also suing their insurers, such as a Las Vegas casino that had an "all risks" policy under AIG Specialty Insurance Company but was denied coverage for COVID-19 losses.

Missouri and Illinois hotels are also separately suing their insurer, Cincinnati Insurance Co., to compensate for their COVID-19-related damages.

But a California federal court decision last month in a case initiated by Fresno, California, hotels against Berkshire Hathaway favored the insurer, reasoning that California law does not cover detrimental economic losses under property insurance contracts.

Representatives for Sunstone were not immediately available for comment Monday.

Sunstone Hotel Investors is represented by Kirk A Pasich and Jeffrey L. Schulman of Pasich LLP.

Counsel information for Endurance American Specialty Insurance Company was not immediately clear on Monday.

The case is Sunstone Hotel Investors, Inc. v. Endurance American Specialty Insurance Company, case number 8:20-cv-02185, in the U.S. District Court for the Central District of California.

--Editing by Peter Rozovsky.

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