Insurance companies are facing lawsuits in New Jersey courts over the denial of business interruption coverage on behalf of establishments that lost revenue due to shelter-in-place policies prompted by the COVID-19 pandemic.

Three class action suits have been filed in the District of New Jersey in recent days on behalf of restaurants that were denied business interruption coverage. Similar suits have been filed in other states as well.

Class action powerhouse firms Carella, Byrne, Cecchi, Olstein, Brody & Agnello; Seeger Weiss; and Robbins Geller Rudman & Dowd filed the three New Jersey suits. The latest was filed Tuesday against Chubb Limited, which is headquartered in Warren, and subsidiary Indemnity Insurance Company of North America, by Benito Ristorante, an eatery in Union. The suit is filed on behalf of a nationwide class and New Jersey subclass of businesses with standard Chubb commercial policies that have suffered losses due to stay-at-home orders since March 15.

The same firms filed a similar suit against Chubb on April 20 on behalf of Fiorino Ristorante in Summit and a suit against Cumberland Mutual Fire Insurance Co. on April 29 on behalf of the operator of Cara Mia, a restaurant in Millburn.

Lawyers have already asked the Judicial Panel for Multidistrict Litigation to consolidate such suits.

Chubb also faces a similar suit, filed in the Southern District of Florida by the owner of an eatery in Fort Lauderdale. That suit was filed by Podhurst Orseck and Boies Schiller Flexner.

And in the Central District of California, Chubb faces a suit filed by the Simon Wiesenthal Center, a Los Angeles-based nonprofit organization, claiming that a stay-at-home order by Los Angeles Mayor Eric Garcetti forced the organization to furlough and lay off staff as well as cancel fundraising events. The California case was brought by John Houghtaling of Gauthier, Houghtaling.

But Chubb CEO Evan Greenberg has vowed to fight the suits, declaring that making insurance companies pay COVID-19 costs is "plainly unconstitutional."

In the Benito Ristorante case in New Jersey, Chubb's policy language says business interruption insurance covers a disruption of the business that is caused by physical loss or damage to the property by a "covered peril," and that an infectious agent or communicable disease does not count as physical loss or damage.

But the Benito Ristorante suit says Chubb wrongly concludes the policyholder suffered no physical loss or damage under the policy language.

"In fact, applicable case law holds that loss of use of property that has not been physically altered does constitute 'physical loss or damage' for purposes of first-party property insurance, such as that contained in the Policy," the suit claims.

In addition, the suit says the policy language excluding coverage for an infectious agent or communicable disease does not apply because "Plaintiff's, and other class members', losses were not caused by a 'virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease'. Rather, the efficient proximate cause of Plaintiff's, and other Class Members' losses, were precautionary measures taken by the State of New Jersey to prevent the spread of COVID-19 in the future, not because coronavirus was found in or on Plaintiff's insured property."

Chubb spokesman Jeffrey Zack said in a statement about the business interruption suits,

"As a matter of company policy, we do not comment on specific client claims or pending legal matters. We are doing all we can to help our customers at this time. We are providing discounts for reduced exposures for auto and commercial policies and extending payment terms. We are paying claims for covered losses fairly and promptly. These include many pandemic-related losses in areas such as workers compensation, travel insurance and business interruption where virus and/or pandemic was specifically included. The insurance industry estimates it will pay $100 billion or more in claims related to the pandemic making this the single largest catastrophe in history."

Cumberland Mutual did not respond to a request for comment about the Cara Mia suit.

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