By Bill Wichert

Law360 (February 25, 2021, 9:09 PM EST) -- Chubb Ltd. has been slammed with another New Jersey state lawsuit, this time from an apparel company that claims the insurer wrongly denied coverage for losses arising from the COVID-19 pandemic despite the business obtaining a policy without the type of virus exclusion that has shielded insurers in similar cases.

GK Trading LLC, which does business as Apparel Solutions and makes and distributes women's clothing and accessories, on Wednesday said it lost at least $3 million after coronavirus-related government orders forced it to close a warehouse and shipping facility in the Garden State and a Manhattan showroom, and that Chubb had improperly rejected its claim.

The company stressed that Chubb and related defendants "failed to include explicit language in the policy that excludes or limits any damages from a 'virus or bacteria.'"

"Plaintiff's reasonable expectations in connection with the purchase of this policy — without a viral exclusion — were that in the event of a catastrophic, unforeseen event causing an involuntarily closure, serious curtailment and interruption of its business, the losses it sustained would be covered by the policy," the complaint said.

While insurance companies recently have escaped suits over coverage for losses related to the pandemic based on virus exclusions in their policies, GK Trading's case marks the second New Jersey state lawsuit in about a week over the denial of such coverage under a Chubb policy that did not contain a virus exclusion.

The New Jersey Performing Arts Center launched the other suit on Feb. 16, claiming a Chubb unit wrongly rejected its claim without conducting a "meaningful investigation" after its properties were damaged by the "actual presence" of COVID-19 and its operations were impaired by government restrictions aimed at curbing its spread.

In denying coverage to NJPAC, the insurer asserted that the center had not suffered "'direct physical loss or damage'" to property, according to letters attached as exhibits to the complaint.

Chubb offered a similar rationale in rejecting GK Trading's claim, saying in a June 5 denial letter that "'the impairment of your operations was not due to direct physical loss or damage to property at or within 1,000 feet of your premises,'" according to the letter attached as an exhibit to the company's suit.

GK Trading claimed that at least one of its employees "was present at the covered premises while infected" with the coronavirus, and later added that the "COVID-19 microbial matter" "attached to the surfaces within New Jersey premises and New York premises, thereby causing direct physical loss and [damage] to the subject properties."

"The pervasive spread of the virus causing COVID-19, its release in plaintiff's New York location, and New Jersey location, and the surrounding areas within 1000 feet of the subject locations, as well as the closure by the civil authorities caused physical damages to the covered premises (within the meaning of the policy)," the complaint said.

While "some of the limitations imposed by the shutdown orders were relaxed to an extent, plaintiff continues to suffer business losses," the complaint said.

The business also took aim at Chubb's assertion in its letter that "'even assuming that access to your premises was prohibited, which it was not, such prohibition was not the direct result of the fact that COVID-19 had occurred at or within 1,000 feet of your premises.'"

GK Trading cited the confirmed COVID-19 cases of people residing in the zip code of its New York location.

"Midtown Manhattan is one of the most densely trafficked areas in the United States of America with daily pedestrian traffic often exceeding 30,000 individuals in the surrounding area of the New York Location, such that it is statistically impossible for an individual carrying [the] virus to not come within 1,000 feet of the New York Location during the over two month period defendants purportedly were investigating plaintiff's claim," the complaint said.

Mariya Gonor of Beattie Padovano LLC, representing GK Trading, told Law360 on Thursday, "We feel that the terms and conditions of the insurance contract are clear and should be reasonably interpreted in favor of coverage. When purchasing this policy, the insured had reasonable expectation of coverage in the event of a business interruption such as this one, and we are confident that New Jersey courts will agree with us."

A Chubb representative told Law360 on Thursday, "As a matter of policy, we do not comment on legal matters."

GK Trading is represented by Arthur N. Chagaris and Mariya Gonor of Beattie Padovano LLC.

Counsel information for Chubb was not immediately available.

The case is GK Trading LLC v. Chubb Group of Insurance Cos. et al., case number L-1274-21, in the Superior Court of New Jersey, County of Bergen.

--Editing by Adam LoBelia.

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