Cheers Owner Sues Over Business Coverage Denial

The owner of Cheers in Boston is suing its insurance carriers over what it claims was a wrongful denial of its business interruption insurance claims. Hampshire House, the owner of five restaurants and a distribution center, claims to have lost millions of dollars due to the pandemic.

As the novel coronavirus spread across the globe earlier this year, businesses closed and residents stayed inside in an effort to stem the tide of coronavirus cases. In the months since those closures, many businesses have faced a business coverage denial by their insurance carriers. In some instances, business owners are claiming that their carrier is wrongfully denying these insurance claims based on ambiguous policy language that legally should be interpreted in the policyholder’s favor.

The Hampshire House lawsuit is filed against Fireman’s Fund Insurance and Associated Indemnity Corporation, as well as their parent company Allianz Global Risks United States Insurance Company.

The suit against the company argues that it breached its contract with Hampshire House and failed to act in good faith.

“Hampshire (like others who purchase business interruption insurance) has faithfully paid its premiums. Yet, when Hampshire made a claim because of a catastrophic business interruption caused by state and local emergency orders, the defendants summarily and arbitrarily denied Hampshire’s claims,” the plaintiffs argue, according to the Boston article.

Hampshire House closed all of its facilities as a result of the pandemic and a state order issued earlier this year. The Cheers locations also relied heavily on tourism, according to the suit. Hampshire House continues to pay insurance premiums of up to six figures. It carries $10 million in business interruption insurance and estimates losses of several million dollars.

 “Hampshire (like many businesses) has relied on its business interruption insurance to cover what it is supposed to cover – replacement of business income and payment of ongoing expenses in order to rebuild its businesses,” the filing states.

The suit argues that Allianz instituted a practice regarding COVID-19 insurance claims that led to “improper denial of countless business interruption claims”. Plaintiffs cite a post on the carrier’s website regarding coronavirus claims that read, “In general, any standard property and business interruption coverage must be triggered by physical loss or damage to property at an insured location and infectious disease is usually not a covered peril.”

Hampshire House argues that Allianz failed to make a “good faith investigation, determine coverage and adjust Hampshire’s claims because defendants reached a pre-determined conclusion to deny coverage”. 

Attorneys for Hampshire House argue that insurance policies have long been interpreted in the policy holder’s favor by the court. This is allegedly largely due to the fact that these policies are created and sold by carriers in an effort to make money. Language that is ambiguous or “attempted catch all language” should be interpreted in the policyholder’s favor.

“While the insurance industry may cry afoul about their bottom line, too many small business owners, restaurant owners, gym owners, hotel owners, and medical providers are staring bankruptcy in the face,” attorneys for Hampshire House wrote in a statement. “This is a survival moment and all options must be on the table.”

Is your business in jeopardy because of a business interruption claim denial? Contact the team of insurance lawyers at Millin & Millin to learn about your options today.

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