By Daphne Zhang

Law360 (November 12, 2020, 8:51 PM EST) -- A Pittsburgh art museum said Cincinnati Insurance Co. breached insurance policy by refusing to cover its income loss from COVID-19-related shutdowns, alleging Thursday that the insurer has every duty to cover its loss since the policy does not contain a virus exclusion.

The Mattress Factory Ltd., a nonprofit contemporary art museum, told a Pennsylvania federal court that it suffered "catastrophic" losses due to the pandemic and Cincinnati's alleged wrongful denial of coverage duty.

"No exclusions, conditions, or other limitations in the policy excuse Cincinnati's obligation to provide coverage to the Mattress Factory," the museum said. "The Cincinnati All-Risk Policy does not exclude damages caused by a 'virus' or 'communicable disease.'"

The Mattress Factory, which opened in 1977, said that it had 58,000 individual visits in 2019 and that over 40% of its revenue comes primarily from ticket sales. Its education programs also serve over 20,000 students, teachers and families in the area, according to the suit. However, the museum said it has suffered a financial loss of over $600,000 since March.

This is the not the first such suit filed against Cincinnati this week. On Tuesday, a group of companies that operate a minor league baseball team and stadium sued the carrier in the same federal district court, alleging the insurer's failure to cover them for COVID-19-related losses is a violation of their "all-risk" policy, which contains a pollutant exclusion but not a virus exclusion.

In Thursday's complaint, the museum said that Cincinnati issued a "snap coverage denial" in April without conducting any claim investigation. The insurer demanded that the Mattress Factory show proof via testing of COVID-19 presenting on its property before it sent out the denial letter, according to the suit.

Cincinnati's testing demand is "impracticable," the museum said. "The Mattress Factory is a non-profit arts organization that does not have the requisite expertise or funding to conduct testing to reveal the presence of a novel virus."

The Mattress Factory said the government's closure orders and data of positive COVID-19 cases in the area confirmed the presence of the virus in its surrounding area. It cited government data showing that as of Nov. 2, Pittsburgh has had 4,316 positive tests and 109 deaths, including 42 positive tests in the museum's neighborhood and 231 positive tests and five deaths in its adjacent neighborhoods.

The museum also criticized Cincinnati's April communication that the policy requires "direct physical loss or damage to covered property," saying the requirement does not appear anywhere in its all-risk policy.

Cincinnati in the letter misrepresented property damage as requiring "permanent change in physical appearance," the Mattress Factory alleged, saying such language and requirement does not exist in the policy. It is accusing the carrier of bad faith in violation of the Pennsylvania Unfair Insurance Practices Act.

The museum is asking the court to hold that its losses are covered under its Cincinnati policy, which does not exclude a virus like COVID-19. It's also demanding damages to be determined in a jury trial, plus attorney fees.

A Cincinnati spokesperson said in a statement that the company does not comment on pending litigation and "respect the rights of all parties to have their issues heard and resolved in a court of law."

The Mattress Factory is represented by Dominic I. Rupprecht of Reed Smith LLP.

Counsel information for Cincinnati was not immediately available.

The case is The Mattress Factory Ltd. v. Cincinnati Insurance Co., case number 2:05-mc-02025, in the U.S. District Court for the Western District of Pennsylvania.

--Editing by Daniel King.

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