Attorneys sue Travelers, LA mayor over whether virus-caused shutdowns are covered in policies

Two prominent attorneys sued Los Angeles Mayor Eric Garcetti and Travelers Insurance over business losses incurred by the shuttering of enterprises and workplaces over the coronavirus pandemic.

Five separate lawsuits were filed Friday against Travelers in Los Angeles County Superior Court, either by Los Angeles attorney Mark Geragos, his clients, or properties he owns. All the plaintiffs are also represented by San Francisco-based Dhillon Law Group Inc.

The packet of complaints argue specific payment mechanisms in their insurance coverage plans were triggered when Garcetti ordered all non-essential businesses to close and other establishments to operate in a limited capacity, followed by Gov. Gavin Newsom's statewide shelter-in-place order.

According to the suit, Geragos is suing in his capacity as a business owner and landlord and on behalf of several clients.

Travelers' standard commercial property policies that include business interruption coverage "have very specific exclusions stating that losses resulting from a virus or bacteria, including physical damage or income, are not covered," spokesman Paul Holmes in a statement Monday. "We will continue to engage with policymakers and regulators to help them find effective solutions to support businesses in managing through this unprecedented crisis."

Geragos said in a statement, "The Travelers Insurance company has decided to read from a script denying coverage to business owners who dutifully paid them premiums on cases for decades. They have misread their policies, their contract and the law."

Kirk Pasich of Pasich LLP, who is not involved in the cases, said, "I think Travelers has taken a firm position that it isn't going to pay for losses related to this mess, and saying there's no direct fiscal loss or damage," while the plaintiffs say there is.

"The lawsuits contend, the presence of the virus does constitute physical damage and makes them liable for property damage coverage lost during the pandemic, and I agree," Pasich said.

He noted a letter sent to the House Committee on Business by a consortium of insurance company representatives, which said, "Business interruption policies do not and were not designed to provide coverage against communicable diseases such as Covid-19." But Pasich said he disagreed with that.

Mark Geragos

One of Geragos' complaints argued the plaintiff "paid policy premiums to Travelers, specifically to provide additional coverages for 'business income and extra expense Coverage' in the event of business closures by order of civil authority."

Harmeet Dhillon, representing Geragos and other clients, alleged in a phone interview Monday, "The industry got together in some cartel-like fashion and decided on a blanket basis to deny cases associated with coronavirus." She said the individual nature of each case made them unlikely to be consolidated into a class action and said she was planning similar filings by other clients to proceed later this week.

According to Joan M. Cotkin, senior insurance counsel at Pillsbury Winthrop Shaw Pittman LLP, "The insurance industry has taken an aggressive public stance on all these claims and potential claims by preemptively advertising their position of no coverage for closure by civil authority. We strongly believe that there is coverage for many civil authority and related business interruption claims. We are seeing claims submitted but have not yet seen formal responses to claims. We expect those to be coming in soon--over the next 30 days."