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Law360 (October 14, 2020, 5:41 PM EDT) -- A California preschool is suing Markel Insurance Co. over its denial of the school's COVID-19 business interruption claim, saying the insurer didn't investigate properly and the denial "distorts" information from the claim.
In a complaint filed in September but removed to the Southern District of California on Tuesday, Baldwin Academy Inc. said that it shut down operations on March 16, after finding out that a parent of one student had tested positive for the disease.
According to the complaint, the parent notified Baldwin Academy that she had contracted the disease during a recent trip to Colorado, and had then repeatedly visited the school's campus in the week before its closing to pick up and drop off her child. During those visits, the parent came into contact with other parents, faculty, and pieces of equipment such as touchpads, door handles and other items, the academy said.
Within the week, the academy put in a claim to Markel and responded to the insurer's request for information, but was denied coverage in a letter dated April 20, which the preschool says "materially distorts" the information it sent to Markel.
The complaint lists several instances of alleged inaccuracies in the denial letter, such as Markel stating that Baldwin Academy didn't show the parent had been at the campus after returning from Colorado, despite Baldwin providing the parent's email alerting them to her diagnosis, and offering to provide the insurer with her name if the information remained confidential.
Markel's letter also allegedly stated that Baldwin Academy didn't receive orders or recommendations from health departments to shut down, despite the preschool citing executive orders mandating nonessential services close, according to the complaint.
The preschool also disputed Markel's assertion that the virus did not cause "direct physical loss or damage," saying the policy does not require proof of physical damage. Baldwin Academy further argued that a communicable disease endorsement overrides the bacteria and virus exclusion in its policy.
According to the complaint, Markel refused to do any further investigation and repeatedly affirmed the denial based on the "misleading, inaccurate and/or false statements" of the April letter.
The suit brings claims for breach of contract and breach of implied covenant of good faith and fair dealing, and seeks a declaration that Markel owes coverage for the school's business losses, as well as other unspecified damages.
Representatives for the preschool and Markel could not immediately be reached for comment Wednesday.
Baldwin Academy is represented by Laleaque Grad of The Grad Law Firm.
Markel is represented by Bennett Evan Cooper of Dickinson Wright PLLC.
The case is Baldwin Academy Inc. et al. v. Markel Insurance Company et al., case number 3:20-cv-02004, in the U.S. District Court for the Southern District of California.
--Editing by Alyssa Miller.
Correction: An earlier version of the story misidentified the law firm for Markel's counsel. The error has been corrected.
For a reprint of this article, please contact reprints@law360.com.
