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Legal loses lawsuit against insurer over Covid-19 losses; judge says its policy only covered physical damage and the virus doesn't hurt tables or chairs

A federal judge last week dismissed Legal Sea Foods' lawsuit against its insurer over its "all risks" insurance policy, saying the policy only covered "physical" damage to its restaurants and that while Covid-19 might be devastating, the virus did no harm to the chain's physical assets.

US District Court Judge Nathaniel Gorton's decision could mean bad news for a number of other local businesses - including the Hampshire House - that also sued when their insurers refused to pay claims based on losses due to Covid-19 over the past year.

Restaurants in particular might be in for a legal loss because, in addition to declaring that the policies, which cost extra, exclude virus losses directly, Gorton also dismissed Legal's claim it was also due money under a separate clause calling for payments should a business be closed on the order of a "civil authority" - in this case, Gov. Baker and his Covid-19 emergency orders.

Gorton ruled that although Baker may have detracted from Legal's business by ordering its dining rooms shut, he did not, in fact, "prohibit access" to the restaurants as required by the "civil authority" clause of its policy:

Although Legal alleges that the Orders mandated the closure of and prohibited access to some of its insured restaurants, plaintiff fails to identify any specific Order that expressly and completely prohibited access to any of the Designated Properties. In fact, Legal acknowledges in both [its complaint] and its memoranda opposing the [request for dismissal] that the Orders permitted its restaurants to continue carry-out and delivery operations. Consequently, Legal cannot establish a necessary prerequisite of coverage under the civil authority provision of the Policy. ...

To the extent Legal suggests that dismissal of its civil authority coverage claim is inappropriate because it would have suffered greater financial loss by keeping its restaurants open for carry-out and delivery services, it does so in vain. It is immaterial whether it is economically feasible for Legal to continue restaurant operations solely for carry-out and delivery sales. Rather, the relevant inquiry is whether the Orders prohibited access to the Designated Properties, which they clearly did not for the reasons stated above.

Via Boston Business Journal.

PDF icon Complete ruling132.65 KB

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Of Gloucester, of course.

This makes it a Legal matter, even if the parties involved are a bit fishy.

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I completely blew that! Talk about your scales of justice.

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“All risk” isn’t what you think it means.

Just an FYI.

Without understanding the exclusions explicitly noted in the policy, your making a lot of assumptions here.

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With a LEGAL document.

FYI, I’m guessing, legal seafood utilized a risk purchasing group to purchase their insurance. The insurance they purchased probably was a minimum requirement for their most stringent landlord/contract they’ve signed.

Or alternatively, they used a managing general agent to purchase an industry specific policy from a local broker, which is always going to be subpar.

Regional companies typical use Main Street brokers who don’t know what the fuck their doing when you expand.

It’s all about pricing, until THIS HAPPENS.

I work at Lloyd London, and this is incredibly typical.

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Covers non physical damage as long as they are secondary losses to a physical damage claim. Think BLM riots. Physical losses also resulted in non physical damages like loss of income or extra expenses. Those were covered and total damages including physical surpassed $1B last year alone.

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Yellow card!

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When the company was originally determining the insurance needs, did they think they were covered if the governor ever said "you're not allowed to let people dine in your restaurants"?

Did they imagine that the governor would add "but you can do takeout", and that a judge would consider that "access" to the restaurant?

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Unless the physical assets were sanitized by fake sanitizer unbeknownst to the people who were sanitized. Weren' there huge deliveries of fake bad sanitizer products in the golden age of unregulated PPE ?

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There is such a thing - it is a separate rider on business insurance or event insurance.

I'm amazed that given the stature of the Legal organization that they would have expected pandemic shutdowns to be covered without explicit inclusion. Pandemic insurance is an add-on feature, and it is not a new thing.

A friend of mine has a house painting business out west. In the late 1990s he read Laurie Garrett's "The Coming Plague" and he then did two things: He put a pandemic clause in all his contracts, and he got a pandemic rider on his business insurance.

His insurance agents rolled their eyes, but they priced it out and sold him the rider. His clients sometimes asked about the clause, but mostly they didn't.

Fast forward 20 years. He's still in business. He had to delay some jobs. But he was able to use the pandemic clauses to enforce worker safety, retain contracts, and was able to pay his crews during shut downs and slow downs when the insurance paid out on the pandemic rider.

The irony is that he won't be able to get that same deal on that pandemic rider anymore because, well, reality. He may not be able to afford it. But his competitors have now started using pandemic clauses in their contracts.

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It was pretty cheap, and then there was a magnitude 5 in the next county. Now more people buy it and it's not as cheap. :-)

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Yeah, that's a big part of the scam. You pay for coverage for years, and then if you ever use it (and they actually approve the claim), they jack up your rates or drop you entirely.

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