State Farm has become the latest insurer hit with a class action lawsuit accusing it of wrongly denying business interruption coverage to restaurants, bars and other businesses ordered closed by Illinois Gov. JB Pritzker as part of state’s response against COVID-19.
The class action comes five days after the owners of the Ritz-Carlton Hotel in Dallas, Texas, launched a class action lawsuit of their own against Zurich American Insurance, leveling similar claims in federal court on behalf of hotel owners across the U.S.
On June 17, attorneys Alexander Loftus, David Eisenberg and Jeffrey Dorman, of the firm of Loftus & Eisenberg Ltd., of Chicago, filed suit in Cook County Circuit Court against Bloomington-based State Farm.
Alexander Loftus
The lawsuit was brought on behalf of named plaintiff Jaewook Lee, owner of the Evanston Grill restaurant, in north suburban Evanston. The plaintiffs seek to expand the action to include virtually all businesses in Illinois insured by State Farm that have been closed by Pritzker’s orders.
“Just like thousands of other small businesses insured by State Farm in Illinois, Plaintiff (Evanston Grill) was obligated by government orders to shut down or drastically limit its operations,” the complaint said. “Plaintiff and many others purchased insurance to cover just this sort of risk. Unfortunately, State Farm has applied tortured logic to reason that it does not have to pay for these losses that it previously promised to insure.”
The lawsuit centers on actions taken by State Farm throughout the spring, allegedly to deny swarms of claims from small business owners throughout Illinois whose restaurants, bars, theaters, stores and other businesses closed under Pritzker’s orders.
In March, Pritzker declared a statewide disaster in response to the outbreak of the COVID-19 pandemic in Illinois. Under that declaration, Pritzker assumed broad, sweeping emergency powers, including the authority to order thousands of businesses closed statewide in the name of aiding the public health effort to slow the spread of the novel coronavirus that causes COVID-19.
The governor’s authority to exercise those powers remain a subject of litigation elsewhere. But in the months that have followed the orders, businesses of all sizes and types throughout the state have been left to grapple with the practical impacts of Pritzker’s shutdown orders, including massive losses of income, employee furloughs and layoffs, bankruptcies and, for many, permanent closure.
In addition to seeking loans and tax assistance from the federal and state governments to stay afloat, businesses have also sought reimbursement through their insurance policies for the interruption to their businesses.
However, across the country, reports indicate such claims have been regularly denied by insurers.
That, in turn, has led to a rising tide of lawsuits. Now, those individual claims are being converted into class action claims against some of the country’s largest insurers.
On June 12, attorneys with the firms of Dicello Levitt Gutzler LLC, of Chicago; Daniels & Tredennick, of Houston; Burns Bowen Bair LLP, of Madison, Wis.; and the Lanier Law Firm P.C., of Houston, filed suit in Chicago federal court against Schaumburg-based Zurich American.
That lawsuit asserts government shutdown orders, which closed restaurants, gyms, spas and other associated businesses at hotels and resorts across the U.S., along with government stay at home and social distancing orders, in response to COVID-19, tanked their revenues.
However, despite the shutdown orders, the hotel plaintiffs accused Zurich of wrongfully denying their insurance claims for revenue losses allegedly directly related to the government actions.
The hotel plaintiffs are seeking to expand their case to include hotel and resort owners across the country, who suffered similar losses and denial of coverage.
In the same way, the plaintiffs in the Cook County class action are accusing State Farm of similarly denying what they claim should have been valid claims for loss due to government actions against them and their businesses.
While the insurers asserted various exclusions related to the virus itself, the plaintiffs said their loss of business has not been because of a coronavirus outbreak at their businesses, but rather because of the state response that included the shutdown orders.
They also asserted the closure orders should not qualify as a “seizure or destruction” of the plaintiffs’ properties, which would also provide insurers with a coverage exclusion.
Loftus said the lawsuit marks the first such class action filed against State Farm in Illinois. He noted the lawsuit also includes a plea to the court for a declaration that “Illinois businesses are covered if there is another shut down order should there be a resurgence of the virus this winter.”
“This action seeks to right the wrong and get a fair interpretation of the policy for all insureds by a Cook County judge,” said Loftus in a prepared statement.
A spokesperson for State Farm said: "The filing of a lawsuit does not substantiate the allegations within the complaint. We’ve recently learned about the filing, and it is premature to provide further comment at this time.”
A spokesperson for Zurich declined comment.