Law360 is providing free access to its coronavirus coverage to make sure all members of the legal community have accurate information in this time of uncertainty and change. Use the form below to sign up for any of our weekly newsletters. Signing up for any of our section newsletters will opt you in to the weekly Coronavirus briefing.
Sign up for our Corporate newsletter
You must correct or enter the following before you can sign up:
Thank You!
Law360 (June 25, 2021, 11:14 PM EDT) -- Tapestry Inc., owner of global fashion brands like Coach and Kate Spade, has sued Factory Mutual Insurance Co. in Maryland state court, claiming that it suffered a decline of more than $1 billion in revenue stemming from the pandemic that the insurer is refusing to cover.
Tapestry also told the court in its complaint Thursday that it suffered a $652 million annual loss, just a year after a $643 million profit. It alleged that FM Global is dragging its heels on paying out the company's enormous financial losses caused by pandemic-related closures.
"To cushion the impact of the Coronavirus and COVID-19, Tapestry turned to its property insurer, FM, to whom Tapestry paid over $10 million in premiums in exchange for $2 billion in property damage and time element (also known as business interruption) coverage during the policy periods," the suit alleges. "FM, however, declined to fulfill its obligations to Tapestry under the policies."
It claims that at least 1,261 Tapestry employees were diagnosed with COVID-19, which it says serves as "direct proof" that the virus was present in its stores.
In other legal proceedings prior to the pandemic, FM argued that "physical loss or damage," as referenced in most insurance policies, means loss of use, and that there is no structural alteration requirement for coverage, Tapestry claims.
"FM cited with approval the very same cases cited by policyholder attorneys across this nation in COVID-19 insurance recovery actions for the proposition that there is no structural alteration requirement to physical loss or damage and that the loss of use or loss of functional use of property is sufficient to trigger coverage — propositions that FM now strongly contests in COVID-19 cases," Tapestry said.
Tapestry said that it filed a claim earlier this month and that less than two weeks later, on June 22, FM denied most of the requested coverage in a letter. That letter used language that the insurer provided its personnel to "ensure" that coverage is not granted for COVID-19 losses, Tapestry said.
The complaint asks the court to declare the scope of FM's obligation to pay for Tapestry's losses and, should it determine FM's coverage positions are wrong, award damages for breach of contract.
"As a result of FM's breaches of contract, Tapestry has suffered and continues to suffer damage in an amount to be proven at trial, but currently estimated to exceed hundreds of millions of dollars in damages," Tapestry said. "By failing to investigate the Tapestry claim, FM breached its duty of good faith and fair dealing to its insured. As a result, Tapestry is entitled to consequential damages for FM's breach of the policies."
Representatives for the parties did not immediately respond to requests for comment Friday.
Tapestry is represented by Deborah B. Baum, Laura A. Freid-Studlo, and Brendan W. Hogan of Pillsbury Winthrop Shaw Pittman LLP.
Counsel information for FM could not immediately be obtained Friday.
The case is Tapestry Inc. v. Factory Mutual Insurance Co., case number C-03-CV-21-002002, in the Circuit Court For Baltimore County, Maryland.
--Editing by Regan Estes.
For a reprint of this article, please contact reprints@law360.com.
