Seattle Restaurant Operators Claim National Surety Wrongfully Denied COVID-19 Property Damage Claims

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National Surety Corporation faces a proposed class action over its alleged practice of denying all insurance claims for business income coverage related to government closure orders issued in response to the COVID-19 crisis.

According to the case, National Surety has violated the terms of its commercial property insurance policies in issuing “across-the-board coverage denials” without performing meaningful investigations of policyholders’ claims.

The plaintiffs, two companies that operate several Neighborhood Grills restaurants and bars in Seattle, claim they purchased one or more “all risk” National Surety policies to cover properties used for specified business purposes. Per the case, the defendant promised to pay the plaintiffs for “direct physical loss of or damage to” a covered property caused by various covered events:

Moreover, the plaintiffs’ policy included coverage for “the actual loss of business income or rental value . . . if a special event, not at a covered location, is canceled due to direct physical damage to property . . . caused by a covered cause of loss” and expense reimbursement if an event had to be canceled or postponed as a result of actions of civil authorities that prevent access to the property, the lawsuit relays.

Per the case, the defendant issued “materially identical policies” to thousands of other businesses throughout Washington and other states.

The lawsuit explains that a series of executive orders and proclamations issued by Washington Governor Jay Inslee in response to the COVID-19 crisis caused the plaintiffs to suspend their businesses and incur extra expenses beginning in late February 2020 and continuing through the rest of the year.

“In order to comply with the proclamations and orders, Plaintiffs were unable to use their restaurant, bar, and private event spaces for its insured purpose of sit-down dining, bar, and live entertainment,” the complaint relays.

As a result of the government’s response to the COVID-19 crisis, the plaintiffs were deprived of the use of their properties and were unable to use the spaces for their intended and insured purpose, the case claims. In the wake of the pandemic, the plaintiffs have suffered “direct physical loss and/or direct physical property damage” covered by their National Surety insurance policy, according to the suit.

Despite submitting a claim for insurance benefits in March 2020, the plaintiffs were allegedly told that their claim was denied after “no meaningful investigation.”

“Without any basis, Defendant’s denial letter asserts there was not any suspension of Plaintiffs’ operations nor any direct physical loss of or damage to covered property,” the complaint states. “Defendant’s denial letter also concludes without basis that access to Plaintiffs’ property was not prohibited due to direct physical loss of or damage to property at other locations.”

According to the suit, National Surety has a practice of denying all claims for business losses due to the government’s response to COVID-19 without adhering to language in its policies promising to conduct meaningful investigations of policyholders’ claims.

The lawsuit against National Surety is among the latest to be filed against commercial property insurers over their apparent blanket denials of claims relating to the COVID-19 pandemic.

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

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