The Hartford Dodges Restaurant's COVID-19 Coverage Suit

By Hailey Konnath
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Law360 (March 15, 2021, 7:44 PM EDT) -- A South Carolina federal judge on Friday freed The Hartford Financial Services Group Inc. from a pair of Charleston restaurants' COVID-19 insurance coverage suit, finding that Hartford can't be held liable in the dispute because the policy was issued by one of its subsidiaries.

Black Magic LLC, which operates the Black Magic Cafes, claimed Hartford should cover the hit the restaurants took when Gov. Henry McMaster shut down indoor dining as the virus ravaged the state. The restaurants looked to represent a class of other policyholders who were denied business income interruption claims due to the virus.

In its motion to dismiss, Hartford said Black Magic lacked standing and personal jurisdiction and had failed to state a claim. Notably, Hartford said it wasn't a party to the contract at issue because its subsidiary Twin City Fire Insurance Co. issued the policy, not Hartford.

And U.S. District Judge Howe Hendricks agreed Friday, noting that Black Magic's complaint "lumps all defendants together in its substantive allegations regarding breach of contract and purportedly improper denial of coverage."

By naming Hartford in the suit, Black Magic is going after an insurer with which it has no contract, Judge Hendricks said. He added that the restaurants can't demonstrate any injury fairly traceable to Hartford's conduct.

"Twin City issued the policy and only Twin City could deny coverage," the judge said.

On top of that, Black Magic hasn't shown Hartford is subject to general or specific personal jurisdiction in South Carolina. The company isn't incorporated there nor does it have a principal place of business in the state, Judge Hendricks said. And a parent company "is not subject to personal jurisdiction in a particular forum merely due to its relationship with a subsidiary," he said.

Even if Black Magic had established jurisdiction, the restaurants' claims are premised on the existence of a contractual relationship between Hartford and Black Magic, Judge Hendricks said.

"However, as explained above, Twin City, not [Hartford], agreed to insure Black Magic," he said.

The judge freed Hartford from the suit, ruling that Black Magic's claims can proceed against Twin City alone.

According to the suit, Black Magic purchased a business owner's policy from Twin City Fire Insurance Co. that was effective from July 2019 to July 2020. The policy included limited virus coverage for certain virus-related losses, Black Magic said.

Black Magic was accusing Hartford of breach of contract. The restaurants looked to represent a class of policyholders who purchased the same business owner's policy with the virus coverage and were denied their claims.

Insurers have fielded hundreds of suits stemming from the pandemic. Hartford in particular has battled more than 225 coverage cases, according to a database maintained by the University of Pennsylvania's Carey Law School.

In January, a Georgia federal judge ruled that a unit of The Hartford was not obligated to cover an Atlanta-area law firm's losses due to a COVID-19 stay-at-home order, saying the firm's office had not sustained the sort of direct physical loss or damage required by its policy. Karmel Davis & Associates Attorneys-At-Law LLC had failed to meet the prerequisites for coverage in any of the sections of its "all risk" policy, according to the order.

And in December, a New York federal judge found that Hartford wasn't obligated to cover a Manhattan art gallery and dealer's financial losses due to a government-mandated closure amid the COVID-19 pandemic, finding that the gallery's woes didn't result from a "direct physical loss" of its property as required by its policy.

In that case, U.S. District Judge Lorna G. Schofield granted Hartford unit Sentinel Insurance Co. Ltd.'s motion to dismiss the suit filed by policyholder 10012 Holdings Inc., which operates the Guy Hepner art gallery in Manhattan's Chelsea neighborhood.

Counsel for the parties didn't immediately respond to requests for comment Monday.

Black Magic is represented by Clayton B. McCullough and Ross Alan Appel of McCullough Khan.

Hartford is represented by Kevin A. Hall and M. Todd Carroll of Womble Bond Dickinson LLP and Sarah D. Gordon of Steptoe & Johnson LLP.

The case is Black Magic LLC v. Hartford Financial Services Group Inc. et al., case number 2:20-cv-01743, in the U.S. District Court for the District of South Carolina.

--Additional reporting by Jeff Sistrunk and Daphne Zhang. Editing by Stephen Berg.

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Case Information

Case Title

Black Magic LLC v. Twin City Fire Insurance Company et al

Case Number



South Carolina

Nature of Suit



Bruce Howe Hendricks

Date Filed

May 04, 2020

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