New Mexico Restaurant Alleges Continental Casualty Co. Wrongfully Denied Insurance Claim for COVID-19-Related Closure

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A New Mexico restaurant and espresso bar alleges in a proposed class action that Continental Casualty Co. wrongfully denied its insurance claim for damages suffered after the business was forced to close due to the COVID-19 outbreak.

The plaintiff claims its purchase of the defendant’s special property insurance included business income, civil authority, extra expense, and sue and labor coverage that should have applied to losses sustained as a result of the eatery’s pandemic-related closure.

According to the suit, Continental’s special property coverage form provides “business income” coverage, which allows an insured to submit a claim for losses incurred due to a necessary suspension of operations, and “extra expense” coverage to pay for costs related to continuing operations and minimizing the suspension of business. The special property coverage form’s “civil authority” component pays for losses incurred as the result of an action by a civil authority that prohibits access to the insured property, per the complaint. Finally, the “sue and labor” provision of the defendant’s special property coverage, listed under a section entitled “Duties in the Event of Loss or Damage,” provides coverage for expenses associated with the insured’s responsibility to prevent further damage to the covered property, the case says.

The lawsuit claims the insurance policies purchased by the plaintiff business and proposed class members are “all-risk property damage policies,” meaning they cover all risks of loss except such that are expressly excluded. The plaintiff claims the defendant did not explicitly exclude in the special property coverage form coverage for losses related to viruses and therefore agreed to pay for the restaurant’s “actual loss of business income” and other expenses caused by the suspension of  operations due to the novel coronavirus.

According to the case, civil authorities with jurisdiction over the plaintiff’s Mesilla, New Mexico business issued several orders throughout March and April that limited and then prohibited the eatery’s operations. New Mexico governor Michelle Lujan Grisham issued an executive order declaring a state of emergency on March 11, 2020, the day before the state’s Department of Health issued limitations on public gatherings of more than 100 people, the suit states. On March 23, the state limited public gatherings of more than five people and ordered the closure of places of public accommodation, such as the plaintiff restaurant, for on-site consumption, the lawsuit says.

The plaintiff restaurant allegedly submitted a claim of loss under the defendant’s policy on March 18 that was subsequently denied by Continental Casualty Co. on April 14.

The plaintiff contests that the defendant has, “on a widescale and uniform basis,” refused to pay claims under its business income, extra expense, civil authority, and sue and labor coverages for losses related to COVID-19, in direct violation of insureds’ policies.

The full complaint, including the definitions of the proposed nationwide classes, can be read below.

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