Sentinel Insurance No Payouts for Covid-19 Business Losses Class Action

Sentinel Insurance Companies, Limited offers insurance policies, including for commercial all-risk insurance. But the complaint for this class action alleges that Sentinel has breached its contracts because it is refusing to pay out to compensate policyholders for business losses incurred because of Covid-19 closures.

The class for this action is all policyholders in the US who bought commercial property coverage, including for business income, extra expense, and/or action of civil authority coverage, from Sentinel, and who have been denied coverage under the policy for lost business income after being ordered by a governmental entity, in response to the Covid-19 pandemic, to shut down or otherwise curtail or limit their business operations, or after having sustained a loss due to an action by civil authority.

The plaintiff in this case, Academy Swim Club, Inc., is a business in Valencia, California. It held an all-risk insurance policy with Sentinel that provides coverage for “direct physical loss of or physical damage to Covered Property at the premises … caused by or resulting from any Covered Cause of Loss.” The Covered Causes of Loss are supposed to be risks of direct physical loss, unless that specific type of loss is excluded by the policy.

The policy does not define “direct physical loss of or physical damage to[.]” However, the complaint claims, “Physical loss of, or physical damage to, property may be reasonably interpreted to occur when a covered cause of loss threatens or renders property unusable or unsuitable for its intended purpose or unsafe for ordinary human occupancy and/or continued use.”

According to the complaint, Sentinel promises “to pay for the actual loss of ‘Business Income’” sustained by Academy because of the “necessary suspension of your ‘operations’ during the ‘period of restoration.’” The policy also provides coverage for extra expenses and business income losses sustained because of an “order of civil authority[.]”

The complaint refers to a study in The New England Journal of Medicine to say that Covid-19 is “widely accepted as a cause of real physical loss and damage. It remains stable and transmittable in aerosols for up to three hours, and on surfaces” for as long as three days.

On March 16, 2020, the Centers for Disease Control and Prevention (CDC) issued guidance to delay the spread of Covid-19; on March 19, Governor Gavin Newsom issued a stay-at-home order for non-essential workers and the Health Officer of the County of Los Angeles issued an order that closed all non-essential businesses.

Academy closed its business on March 17, 2020 and has only been permitted to reopen with restrictions. According to the complaint, it has had substantial business losses.

Sentinel has refused to pay for Academy’s business losses, saying that “coronavirus did not cause property damage at your place of business or in the immediate area…”

Article Type: Lawsuit
Topic: Insurance
Tags: Business Insurance, Covid-19 Related, Denial of Benefits, Insurance