Class-action lawsuit joins growing number over business interruption insurance denials amid COVID-19 pandemic

A class-action lawsuit led by a Monroe County eatery joined a growing number of lawsuits over business closures related to the COVID-19 pandemic, and whether losses from those closures are covered by business interruption insurance.

The lawsuit filed Wednesday by Badger Crossing Pub & Eatery, a Cashton business that would be the lead plaintiff in the class action if it’s approved by a judge, demands that Society Insurance cover business losses that happened as a result of business closure orders issued by Gov. Tony Evers as part of a strategy for combating the spread of COVID-19, the respiratory disease caused by the new coronavirus.

The lawsuit, filed in Dane County Circuit Court, also demands a finding that Fond du Lac-based Society Insurance was in breach of its contracts with businesses when it denied coverage for losses related to COVID-19.

The lawsuit is not the first filed against Society over COVID-19 business claims. Earlier this month, Madison Sourdough and a group of Minnesota taverns sued Society in federal court in Milwaukee. Also, two restaurants filed lawsuits in federal court in Illinois, including Chicago’s famous Billy Goat Tavern, alleging Society breached contracts to cover them in the event of a government-imposed shutdown. And earlier this month, Al Johnson’s Swedish Restaurant in Sister Bay also sued Society in Door County Circuit Court over its business interruption coverage.

According to guidance from the state Office of the Commissioner of Insurance, business interruption coverage generally requires that businesses suffer some physical injury or damage in order to file a claim. Some policies might have exclusions for viral infections, so OCI advises businesses to consult their policy to see if they’re covered in the event of a pandemic.

Badger Crossing’s lawsuit claims the presence of COVID-19 at Badger, either in the air or on surfaces, constitutes physical damage.

The eatery closed completely as a result of the state’s orders to prevent the spread of COVID-19. Its policy with Society included coverage for “business income,” “extra expense,” “civil authority” and “contamination,” which kicked in if it incurred losses and extra expenses because of an involuntary business interruption.

The lawsuit states Badger Crossing’s policy did not specifically exclude losses from viruses or pandemics, so its business losses should have been covered.

Instead, the lawsuit states, Society “has issued a blanket denial to (Badger) for any business income losses or other covered expenses related to COVID-19 or the closure orders, without first conducting a meaningful investigation.”

Society Insurance spokeswoman Rebecca Kollmann said Society “does not comment on ongoing litigation. We look forward to a favorable resolution of this situation in the near future.”

Brief timeline

Evers issued an order on March 17 that closed all bars and restaurants except for take-out or delivery service. Evers’ “safer at home” order, issued on March 24, further restricted bars and restaurants selling alcohol, barring the delivery of alcohol to customers. On April 16, Evers extended the “safer at home” order to May 26.

The closure orders, the lawsuit states, triggered the business income, extra expense, civil authority and contamination coverages under Badger’s policy.

And because there were people present at Badger Crossing who carried COVID-19, and COVID-19 particles were both airborne and on surfaces there, Badger Crossing sustained a direct physical loss or damage to its property, the lawsuit asserts.

Badger Crossing submitted its claim to Society Insurance on March 31. It was denied the next day.

Warning issued

The lawsuit claims that on March 16, Society had circulated a memorandum to “agency partners” concluding Society policies would not likely provide coverage for losses due to any governmental shutdown for COVID-19. It instructed brokers to discourage policyholders from filing claims.

Society contends, the lawsuit states, that the presence of coronavirus does not constitute “direct physical loss or damage” and that no government authority has barred Badger access to its premises because of contamination, as it’s defined by the policy. The lawsuit states Society provided no basis for its conclusions.