Law360 (May 18, 2021, 6:16 PM EDT) -- A Boston hotel investor group asked a California federal judge to throw out an insurer's claims that it would only be responsible for two days of coverage during which the hotel hosted a conference later linked to over 300,000 COVID-19 cases worldwide.
The investors said Monday that Endurance American Specialty Insurance was ignoring the reality of the pandemic by asserting that coverage would end after two days, when the Marriott Boston Long Wharf finished cleaning its premises following a large biotech conference held in February 2020.
But two days' coverage isn't what the policy was meant to provide, the hotel group said.
"Endurance crafted a broad definition of interruption period and now asks this court to construe it to be the narrowest possible," Sunstone Hotel Investors Inc. said. "For a year, there has been no guidance, policy or protocol promulgated that would even come close to suggesting that once a property is 'cleaned,' it is safe and can be reopened."
The investors are seeking $40 million in coverage for business losses the Marriott sustained because of the pandemic. They say a provision in their policy covering losses for "biological agent conditions" includes viruses and pathogens like the coronavirus.
Operations at the Boston Marriott were interrupted for far more than two days, the investors said, claiming their policy with Endurance entitles them to up to 12 months of coverage, even if that time frame extends beyond the end of their policy period.
Endurance didn't meet its obligation to clearly define the coverage period, the group said. The insurer could have included language to limit coverage after the date on which a property's cleaning ended, the investors said, but instead it sold a policy "rife with ambiguity."
The investors said their policy was meant to cover prolonged business interruptions. They spent more than $350,000 in premiums specifically for virus coverage, they said, accusing Endurance of adopting a companywide stance not to pay policyholders.
In January, Endurance moved to toss the suit, saying its policy only covered cleanup costs for biological agents. But because Sunstone had not satisfied a required $100,000 retainer for cleanup cost coverage, it had no duty to provide benefits, it said.
U.S. District Judge Cormac J. Carney rejected that argument in March, saying Sunstone's policy gave them "reasonable expectations" that their business interruption losses would be covered, even if they did not have significant cleanup costs.
"It seems to the court that it would be a very rare situation where losses caused by a virus like the coronavirus resulted in cleanup costs over $100,000," Judge Carney said.
Located directly on the city's harbor front, the Marriott Boston Long Wharf was the location of one of the first superspreader events in the United States, the investors said in their original complaint, filed in November 2020. A conference held by Biogen, a Cambridge-based biotech company, seeded hundreds of thousands of infections across the globe, according to a February study published in the journal Science.
Sunstone was forced to suspend the hotel's operations to prevent further transmission of the coronavirus, it said. The hotel has since reopened, with additional pandemic safety measures put in place, according to its website.
Counsel for the parties did not immediately respond to requests for comment.
Sunstone Hotel Investors is represented by Kirk A. Pasich and Jeffrey L. Schulman of Pasich LLP.
Endurance is represented by Zoheb Noorani and Richard Blair Goetz of O'Melveny & Myers LLP.
The case is Sunstone Hotel Investors Inc. v. Endurance American Specialty Insurance Co., case number 8:20-cv-02185, in the U.S. District Court for the Central District of California.
--Additional reporting by Melissa Angell. Editing by Haylee Pearl.
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