Dentist Claims Farmers, Foremost Insurance Cos. Wrongfully Denied Business Interruption Claim Amid COVID-19

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A proposed class action claims Farmers Insurance Exchange and Foremost Insurance Company Grand Rapids, Michigan have wrongfully denied a Georgia dental practice’s business interruption claim related to the COVID-19 crisis.

The lawsuit says the plaintiff purchased from Farmers a Precision Portfolio Policy Precision America Office Program that purported to provide business income, extra expense, civil authority and extended business income coverage. According to the suit, the “all risk” policy was issued on a standard form available from Farmers in all 50 states without material coverage differences, and promised to pay for all covered losses except those expressly and specifically excluded.

Unlike many other commercial property insurance policies, the plaintiff’s Farmers policy does not exclude coverage for losses caused by a virus or communicable disease, the case claims.

As the COVID-19 outbreak began to spread, local and state governments, along with dental industry leaders, issued orders and guidance restricting dentists from performing elective procedures, surgeries, and non-urgent dental visits, the lawsuit states. The suit argues that the plaintiff business, as a result, was forced to suspend or reduce its dentistry practice “for the foreseeable future.”

Although the plaintiff submitted a claim to Farmers for business interruption losses that the dental practice argues were expressly covered under its insurance policy, the defendant denied the claim verbally on April 7 and then formally in a denial letter two days later. According to the complaint, Farmers argued that the plaintiff’s policy contained no business interruption coverage “as there is no direct physical loss or damage to property at the described premises from a covered cause of loss.” Moreover, the insurer allegedly claimed that access to the covered property was not prohibited “due to direct physical loss of or damage to property from a covered cause of loss.”

Further still, the case alleges a Farmers representative informed the plaintiff that the insurer was denying all claims related to business interruption under the Precision Portfolio Policy.

“Upon information and belief,” the complaint reads, “Farmers has, on a wide-scale basis with many if not all of its insureds, refused to provide coverage under the Policy for Business Income losses due to COVID-19.”

The lawsuit contends that in light of the “rapid denial” of insureds’ claims, the insurer has chosen to issue blanket denials rather than conduct an adequate investigation of each policyholder’s claim. Blanket denials are contrary to the language in the Precision Portfolio Policy and breach the defendants’ contractual obligation to pay for insureds’ covered losses, the suit asserts.

“Now more than ever, insured practices who have paid insurance premiums for specifically designed policies to cover interruptions are entitled to the coverage for which they paid,” the complaint reads.

The case reflects allegations in dozens of other lawsuits filed against commercial property insurers over claims denied amid the COVID-19 crisis.

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