Federal lawsuits filed in Pittsburgh against insurance companies that didn’t pay for pandemic-related losses
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Following on the heels of dozens that have already been filed across the country, three potential class-action lawsuits related to covid-19 were filed in federal court in Pittsburgh late this week.
All three complaints were filed against insurance companies alleging that they failed to cover claims for losses their customers sustained because of government-ordered shutdowns during the pandemic.
In one complaint filed in U.S. District Court, James and Jessica McMenamin Jr., of Butler County, are suing Arch Insurance Co. and Arch Insurance Solutions Inc. for failing to cover their losses for a trip that was canceled.
The couple booked tickets on Jan. 23 to travel from Pittsburgh to London, and then for a vacation tour from London to Rome, departing June 18 and returning 10 days later. They booked their travel through Affordable Tours, paying more than $2,500, the lawsuit said.
As part of their travel, the McMenamins also bought an individual travel protection policy from Arch, which would reimburse them in the event of a cancellation, delay or interruption of the trip, the complaint said.
Because of the covid-19 pandemic, the lawsuit said, the trip was canceled by Affordable Tours on April 4.
The couple submitted claims to Arch on May 12 but on June 23, they were denied.
The company responded, “‘[w]e have determined that we are unable to approve your claim or to provide any benefits under your claim.’ ”
According to the lawsuit, the insurance policy included language to cover a circumstance if the policyholder or the policyholder’s traveling companion is “quarantined.”
The suit seeks to represent anyone who is in the same circumstances with the company and claims that the class would include more than 100 people with more than $5 million at issue.
A spokesman for Arch said he could not comment on pending litigation.
Dental practice sues
In the second suit, Berg Dental Offices, of North Fayette, filed a complaint against The Cincinnati Insurance Co., alleging it won’t pay for business income losses during the pandemic.
According to the complaint, Berg bought an “all-risk” insurance policy that covered May 2019 through May 2022.
The complaint alleges that the “all-risk” policy provides “the broadest property insurance coverage available,” and that it was to cover the “actual loss of ‘business income’ and ‘rental value’ sustained by plaintiff due to the necessary suspension of operations. …”
In addition, it said the policy provides additional coverage “for business income losses resulting from an ‘action of civil authority’ which prohibits access to the covered property. …”
According to the complaint, Berg closed on March 16 as part of the mandated government shutdown, and then reopened May 18 on a limited basis to “provide clinically necessary treatment in cases of non-urgent and non-emergent care.”
The dental office filed a claim on March 31 for business interruption. It was denied on April 3.
“The claim asserts loss of business income due to the government shutdown. Cincinnati has determined that coverage is unavailable for the claimed loss,” the company responded. “The claim does not involve direct, physical loss to property at your premises caused by a covered cause of loss.”
The lawsuit claims the insurance company gave no explanation for its conclusion.
The class covered by the complaint, the lawsuit contends, would be policyholders in the United States who purchased commercial property coverage from Cincinnati and who have been denied claims for lost business income caused by the government-ordered pandemic shutdown.
A spokeswoman for Cincinnati said she could not comment on pending litigation.
Company claims pandemic ‘not covered’
A third suit was filed Friday by Rebecca Oglevee against Generali US Branch, which operates as CSA Travel Protection.
In July 2019, Oglevee booked a seven-night stay in Key West at a rental home, scheduled for March 17-24, at a cost of $3,000.
As part of her purchase, the lawsuit said, she bought a travel protection insurance policy.
Because of the pandemic, Oglevee canceled her trip on March 14. The next day, she submitted a claim for reimbursement of the trip, which was declined nine days later.
“[Y]our trip was canceled due to the Corona Virus [sic],” they wrote. “[S]ince your cancellation was not due to a covered event, we are unable to provide any benefits for your claim.”
However, the lawsuit notes, “in tacit acknowledgment that plaintiff is owed some refund, CSA issue plaintiff a voucher in the amount of the premium paid for the policy.”
All three lawsuits were filed by Pittsburgh attorney Gary F. Lynch.
John C. McMeekin II, the chair of the Tort Trial and Insurance Practice Section of the American Bar Association, said he ultimately expects the number of pandemic-related class-action complaints to be in the hundreds.
Already, he said, there have been dozens against airlines, tour companies and event operators.
The most important consideration in those types of claims, McMeekin said, is the language in the contract.
Lawmakers considering new laws
Many states and the federal government are considering legislation relative to insurance claims for business interruption losses caused by the pandemic.
On Thursday, a group of Pennsylvania senators held a virtual news conference to talk about bipartisan legislation pending here.
That bill, introduced by state Sen. Pam Iovino, D-Mt. Lebanon, would clarify “ambiguous language” in the law and apply to business interruption coverage that contains a “civil authority” clause. Such a clause protects a business forced to close in response to a government action — like a shutdown in response to a natural disaster or other life-threatening event.
“Businesses that have consistently paid their business interruption insurance premiums expect their insurance coverage to provide security during a time of need,” Iovino said a news release. “They need to know that a lifeline they planned for is available and within reach.”
Businesses would not receive additional payment beyond their coverage limits, according to the legislation, and insurance companies would not be mandated to immediately pay the claims, but could instead follow a normal claims-review process.
Insurance industry reacts
The National Association of Insurance Commissioners said in March that business interruption policies were not designed or priced to cover something like a shutdown caused by covid-19.
“Insurance works well and remains affordable when a relatively small number of claims are spread across a broader group, and therefore it is not typically well suited for a global pandemic where virtually every policyholder suffers significant losses at the same time for an extended period,” the group said in a statement.
If insurance companies are required to cover those claims, the statement continued, it could create a substantial solvency risk for the sector and potentially undermine insurer’s abilities to pay other claims.
Any legislation, McMeekin said, will likely have “some really significant ramifications. … It’s going to be a hotly contested issue.”
Already, he continued, there have been class-action business interruption claims filed by fitness clubs, wineries and restaurants.
In any kind of claim like this, he said, “it will be parsing out what the contract terms and conditions are. … It’s going to come down to the language.”
Paula Reed Ward is a Tribune-Review staff writer. You can contact Paula by email at [email protected] or via Twitter .
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