Lawsuit: Evanston Insurance Improperly Denied Coverage for Business Losses Stemming from COVID-19

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A proposed class action claims Evanston Insurance Company has failed to provide benefits to policyholders who were forced to suspend business operations amid the coronavirus pandemic.

According to the 26-page lawsuit, Evanston has a uniform policy of denying all commercial property insurance claims related to business interruptions caused by government closure orders in response to the pandemic.

The insurer’s “across-the-board coverage denials,” the case alleges, are inconsistent with its policy language and obligation to investigate losses suffered by claimants such as the plaintiff, a Lake Forest Park, Washington cryotherapy business.

“This lawsuit is filed to ensure that Plaintiff and other similarly-situated policyholders receive the insurance benefits to which they are entitled and for which they paid,” the complaint states.

The plaintiff provides whole-body and localized cryotherapy and other therapeutic treatments. According to the suit, the plaintiff purchased from Evanston an “all-risk” insurance policy that included business income, extra expense, extended business income and civil authority coverage, as well as a coverage extension. The plaintiff’s policy, the suit says, promised to pay the business for “direct physical loss of or damage to” the covered property.

In response to the COVID-19 crisis, state and local governments issued a series of closure orders beginning in late February 2020 and continuing through the rest of last year. The plaintiff business says it complied with every order and proclamation that required it to close, suspend or curtail its operations, and was therefore deprived of its property’s functionality.

“Loss caused by [Washington Governor Jay Inslee’s] orders and proclamations and/or related to COVID-19 rendered Plaintiff’s property unusable for its intended and insured purpose,” the complaint reads.

According to the case, the plaintiff’s direct physical loss of the use of its covered property falls under its insurance coverage provided by Evanston. Although the company in March 2020 submitted a claim for losses covered under the policy, the defendant verbally denied coverage for the plaintiff’s claim and said a written denial letter would be sent within a week, the lawsuit relays. 

The plaintiff says, however, that Evanston never sent a written denial letter and has undertaken “no meaningful investigation” of its claim despite promising to do so in the business’s insurance policy.

Per the lawsuit, Evanston’s denials of all COVID-19-related business interruption claims are inconsistent with its policy language and obligation to properly investigate each claim. The lawsuit notes that courts have “found coverage or reasonable grounds for coverage” during the COVID-19 pandemic based on the actual or potential presence of the virus in the air or vicinity of the policyholder’s business; the necessity of modifying physical behaviors, such as social distancing, avoiding indoor spaces or avoiding congregating in physical areas; government orders requiring businesses to close or mandating that a property may not be used for its intended purpose; or the need to mitigate the potential or actual presence of the virus within the policyholder’s business.

Evanston was named as a defendant in a similar lawsuit filed in January 2021 over its apparent refusal to cover COVID-19-realted loss claims.

ClassAction.org’s coverage of COVID-19 litigation can be found here and over on our Newswire.

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