Aspen restaurant filed suit against insurer over denied coverage, but has withdrawn
Editor’s note: This story has been updated to reflect that Bosq has decided not to pursue the lawsuit after the extension was filed March 15. Owner/chef Barclay Dodge said Friday morning they contacted the lawyer this week and are not pursuing action.
The Aspen restaurant Bosq is the latest downtown dining establishment to consider court action because of business interruptions triggered by the pandemic.
Owner Barclay Dodge decided recently not to pursue action, he said Friday morning, and has withdrawn from the legal action filed March 15 on their behalf.
Similar to a lawsuit from Italian restaurant L’Hostaria, which is suing its insurance company over denied claims for business losses stemming from public health order shutdowns and restrictions, attorneys contended the Bosq policy should cover its lost income from last year and into 2021.
Barclay said Friday they not interested in “going after people. That’s not who we are.”
When Bosq filed the suit in Pitkin County District Court against Nationwide and Allied insurance companies March 15, Pitkin County was under Yellow restrictions limiting restaurants to 50% capacity indoor dining. On Wednesday, however, the county returned to stricter Orange-level rules because of a rise in COVID-19 case numbers.
Under Orange, restaurants are held to a 25% patron-capacity with a maximum of 50 people, while last drinks are served at midnight. Businesses eligible through the 5 Star State Certification Program can operate under the less severe Yellow restrictions.
The worst period for restaurants locally came over a course of 15 days, starting Jan. 17, when the county’s Red-level orders shut down indoor dining entirely.
L’Hostaria, which has a suit pending against its carrier in the U.S. District Court of Colorado in Denver, is among the growing number of restaurants in the U.S. suing their insurance companies because of denied coverage related to the pandemic.
“We don’t know how many COVID-19 claims have been made and denied, but the nationwide surge in coverage litigation is unprecedented,” said a blog by the national law firm Payne & Fears on the website JD Supra. “Since the first complaint was filed in Louisiana on March 16, 2020, the curve of new litigation increased sharply throughout the country.”
More than 1,500 business-interruption lawsuits were filed between March 16, 2020, and Feb. 15, according to a COVID-19 litigation tracker on Penn Law’s website. Of those complaints, 569 came from “food services and drinking places.”
“For reference, Superstorm Sandy previously held the (unofficial) record for the most-litigated loss event, with a meager 150 (business-interuption) coverage cases filed within one year of the event,” the blog said.
The insurance industry has maintained that business-loss claims due to the pandemic are not covered by general-insurance policies.
“Paying even a fraction of the claims would bankrupt the insurance industry, so insurers had no choice but to deny every coronavirus-related claim and force policyholders to sue to secure coverage,” the blog said.
The Denver law firm Levit Sitcoff PC is representing L’Hostaria in their suits. The complaints allege the carriers for the restaurant denied their claims without investigating them and that public health orders, because they financially damaged the restaurants, triggered the civil authority provisions under the businesses’ general coverage.
But unlike a hurricane or tsunami, for example, the pandemic did not cause direct damage to the restaurant’s property, countered Cincinnati Insurance, the defendant in the L’Hostaria suit, in a Jan. 29 filing seeking dismissal of the suit.
“The coronavirus does not cause direct physical loss to property which is required for the coverage plaintiff seeks in this case,” said the response, which was filed by attorneys Michael Baniak of Chicago and Conor Boyle of Denver. “This is the majority view nationally in coronavirus-related insurance coverage cases like this. Plaintiff’s commercial property policy simply does not provide coverage for the purely economic loss alleged by plaintiff here.”
L’Hostaria’s attorneys, in a March 3 filing, argued the pandemic has directly damaged the restaurant’s property because “small virus-laden droplets” can make “property exposed to COVID-19 unsafe and dangerous.”
“L’Hostaria requested that Cincinnati reconsider its denial of coverage since COVID-19 was later discovered to have been present on the premises, specifically, customers and at least one former employee had tested positive for the virus,” the filing said. “But Cincinnati refused to conduct further investigation and instead retained coverage counsel to affirm the insurer’s denial of Policy coverage.”
The suit is seeking declaratory judgments that their general-coverage insurance policy applies to their business-loss claims. The suits make claims for breach of contract and bad faith.
The law firm filing the complaints and the owner of Bosq did not return messages left Thursday.
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