Aspen restaurant takes on insurance carrier over business losses from pandemic
An Aspen restaurant is suing over financial losses it suffered due to business interruptions related to the coronavirus.
L’Hostaria is the first Aspen restaurant to seek a court’s declaratory judgment that its general-coverage insurance policy applies to its business-loss claims. Attorneys for the downtown Italian restaurant sued its carrier, Cincinnati Insurance Co., last week in Pitkin County District Court before the case transferred to federal court Wednesday.
“From our standpoint, people spend money on these premiums under the expectation that if they incurred business losses other than no fault of their own, then they had coverage,” said Denver attorney Bradley Levin, who with Susan S. Minamizono represent L’Hostaria in the lawsuit.
In March when dining establishments were being shut down because of public heath orders, restaurant owners lamented their insurance coverage excluded viruses as a payable claim.
As a result, disagreements over policy coverage and denied claims related to pandemic-fueled business disruptions and interruptions have spilled into American courthouses.
As of Dec. 7, businesses had filed 1,432 coronavirus-related lawsuits against insurance carriers in American courts, whether at state or federal levels, according to a litigation tracker managed by the Carey Law School at the University of Pennsylvania.
The food services and drinking places accounted for 541 of those complaints, the most of any industry.
Cincinnati Financial Corp., the parent of Cincinnati Insurance, which is the defendant in the L’Hostaria lawsuit, has been targeted in 146 of those business-loss cases, second to the 220 complaints against Hartford Financial Services Group. Inc., according to the law school’s most recent report.
Messages sent to the company’s attorneys defending the L’Hostaria lawsuit were forwarded to Cincinnati Insurance’s communications department.
“We respect the rights of all parties to have their issues heard and resolved in a court of law,” the company said in an email to The Aspen Times. “For that reason, we do not comment on pending litigation. Cincinnati Insurance remains committed to doing our part to support the families and businesses in our agents’ communities, helping them to proactively manage risks and promptly paying covered claims.”
Levin and Minamizono said they recognize the work cut out for them. Out of those 1,400-plus coronvairus-related cases, 105 have been decided, of which 83 were dismissed or thrown out on summary judgment, according to the litigation tracker.
Yet a ruling by a North Carolina court gave hope to the restaurant industry that litigation is not a lost cause. A judge in Durham, N.C., ruled Cincinnati Insurance was responsible for paying claims to 16 restaurants for business losses because their closure were forced by public health orders.
Insurance companies have argued physical damage to the restaurants — which can be inflicted by a tornado or fire, for example — did not occur and that’s why their claims were denied. The judge in Durham, however, disagreed by noting the companies endured a “direct physical loss.” Cincinnati Insurance has appealed the ruling.
“The prevailing view by courts around the country has been that economic loss alone doesn’t qualify as direct physical damage or loss to property, which is the trigger for business interruption coverage,” Cincinnati Financial CEO Steve Johnston reportedly said in an October conference call to investors.
The L’Hostaria suit is taking a similar legal tact as the one under appeal in North Carolina, arguing the public health orders triggered the restaurant’s civil authority coverage. The suit cites county and state heath orders limiting restaurant service, as well as the county’s affidavit program for overnight visitors.
The accumulation of all of those orders has financially damaged the restaurant, the suit said.
“L’Hostaria ceased its business operations on March 16, 2020, pursuant to the applicable Executive and Public Health Orders,” the suit said. “Although L’Hostaria reopened on April 27, 2020, it resumed with only limited curbside pickup and dining, in accordance with the applicable Executive and Public Health Orders. … L’Hostaria incurred, and continues to incur, business interruption losses of approximately $40,000 per month as a result of the suspension of its operations caused by direct loss to property at its premises due to the presence of COVID-19.”
Cincinatti Insurance denied claims from L’Hostaria in April and affirmed the denial in November, the suit said.
L’Hostaria’s suit makes claims for breach of contract and bad faith, and also seeks a declaratory judgment that the restaurant’s “losses incurred due to the COVID-19 pandemic and government-mandated closure of its property are insured losses under the Policy; and Cincinnati is obligated to pay L’Hostaria for the full amount of the losses it has incurred in connection with the COVID-19 pandemic and government-mandated closure of L’Hostaria’s property.”
L’Hostria’s owner declined comment when reached Friday.
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Nearly 100 locally-owned businesses negatively affected by the COVID-19 pandemic have been awarded grants from a pool of $1.2 million in relief funds from Pitkin County.