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The three pandemic BI exclusions at the centre of a class action lawsuit


May 22, 2020   by Greg Meckbach


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A Laval area restaurant that says it has lost more than $700,000 in two months as a result of the  pandemic is not taking no for an answer from the insurer, who says business interruption coverage does not apply because it’s not a direct physical loss and is citing several exclusions.

Allianz Global Risks US Insurance Company is named as a defendant in a proposed class action lawsuit filed May 14 in Quebec Superior Court in Montreal by law firm Spiegel Sohmer Inc.

Allianz is reportedly relying upon three different exclusions (e.g. no direct physical loss; loss of use or occupancy; contamination) in commercial coverage it wrote for some Canadian restaurants.

Allegations that Allianz is in breach of an insurance contract by denying pandemic coverage have not been proven in court.

The case is in its early stages, and the court has not ruled on the existence of a class.

The representative plaintiff is Restaurant Bâton Rouge Steakhouse & Bar at Carrefour Laval, which claims it has lost $739,000 as a result of its closure Mar. 16. That was five days after the World Health Organization declared the novel coronavirus to be a global pandemic.

“We are unable to comment on individual claims settlements or pending legal matters,” a spokesperson for Munich-based Allianz Global Commercial Specialty told Canadian Underwriter, when contacted about the case. As a result of the pandemic, AGCS says it has been notified of a large volume of claims from businesses around the world, which it evaluates on a case-by-case basis to determine coverage.

The statement of claim from Bâton Rouge quotes from a letter it says it received from Allianz denying its claim. Allianz said there was no “direct physical loss” to the Bâton Rouge property.

“The fact that your ability to carry on your business may unfortunately have been affected or impeded by order, advisories or other information emanating from different levels of government with respect to the COVID-19 pandemic does not constitute direct physical loss of or damage to tangible property insured,” Bâton Rouge reports Allianz stated in its denial letter.

There is also reportedly an exclusion under the property section of the policy for “delay or loss of market, or loss of use or occupancy,” in addition to an exclusion in the business interruption section for “loss of business income due to the shutdown, closure or interruption of business from any and all events or perils where there is no physical loss or damage to the premises.”

In addition, Allianz is reportedly relying on an exclusion for damage caused directly or indirectly by “dampness or dryness of atmosphere, changes or temperature, contamination, freezing, heating, shrinkage, evaporation, loss of weight, leakage, of contents, exposure to light, change in colour or texture or finish, rust or corrosion, marring, scratching or crushing…”

In its statement of claim, Spiegel Sohmer notes that the Québec government considered restaurants and bars to pose a substantial risk because the coronavirus may be present on the premises, or could be brought into the premises and easily spread among the various people who attend at the premises, either as patrons or staff.

Therefore, as a result of the provincial order closing restaurants and bars (other than take-out services), an “unforeseen and unintentional occurrence” has caused business interruption, said Spiegel Sohmer.

The proposed class is: “All businesses engaged in the operation of a restaurant or bar in the province of Quebec who were forced to suspend their business operations or limit their operations to take-out and delivery services as a result of COVID-19 and ensuing governmental order, who sustained a loss as a result and who were denied coverage for business interruption insurance by Allianz Global Risks US Insurance Company, or who have yet to file a claim for business interruption insurance as a result of a preemptive blanket denial of coverage by Allianz Global Risks US Insurance Company.”

The Bâton Rouge at Carrefour Laval says it is a named insured under an all-risk commercial policy written by Allianz for franchisor MTY Food Group Inc.

 

Feature image via iStock.com/Abdolhamid Ebrahimi