A women’s clothing retailer with stores in more than three dozen states has filed a $28 million lawsuit against its insurer, alleging it wrongfully denied its business interruption claim for losses related to the coronavirus pandemic.

In the lawsuit, Altar’d State says it was forced to temporarily close 119 stores in 37 states as governments issued stay-at-home orders and shutdowns to fight the spread of the coronavirus pandemic.

business closed covid 19 375x210 Altar’d State seeks $28 million over denied business interruption coverageBut when the Maryville, Tennessee-based retailer filed a business interruption claim for economic losses, Hartford Fire Insurance Company rejected its claims within days.

According to the lawsuit, Altar’d State paid “substantial premiums to protect its business.” The policy included a “comprehensive program of business insurance” that included coverage for “extra incurred expense” on top of direct losses suffered because of the shutdowns.

After the federal government confirmed the first case of COVID-19 in February, cases of infection proliferated throughout the country, including in the areas where Altar’d State operates retail stores. As the coronavirus continued to spread, state and municipal governments and other authorities ordered the temporary closure of all businesses deemed non-essential, including retail clothing stores.

Retail stores, restaurants, spas and other businesses throughout the country with business interruption insurance coverage argue that their policies include economic losses resulting from government-mandated shutdowns, which is precisely why Altar’d State temporarily closed its doors.

The company also argues that its retail locations were hit by the loss of use resulting from direct physical damage. Hartford Insurance Company and other insurers that provide business interruption coverage argue that viral contamination of surfaces is not physical damage that renders an establishment unusable.

Insurance Business America notes that Altar’d State isn’t the only company suing Hartford over denial of business interruption claims. In May, Magna Legal Services, a Philadelphia-based company that provides legal support services to law firms, corporations and government agencies, filed a lawsuit against its insurance broker, alleging they never explained that Hartford excluded coverage for losses related to viruses, pandemics or “related orders of civil authorities.”

Beasley Allen lawyers are actively investigating and filing similar claims against various insurance companies for denial of business interruption coverage during the COVID-19 pandemic, and are involved in advocating for consolidation of these actions in an MDL. Dee Miles, head of our Consumer Fraud & Commercial Litigation Section, Rachel Boyd, and Paul Evans, lawyers in the Section, are spearheading this litigation for our firm and are monitoring all MDL developments as they arise.

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