Automatic Seafood and Oysters, the Birmingham-based restaurant recently nominated for a James Beard Foundation Award for best restaurant in the country, has filed a federal class action lawsuit against its insurer, Cincinnati Insurance Company, for breach of contract after the company refused to cover Automatic Seafood’s business interruption claim.
“Under the policy, defendant promised to cover the losses and expenses, and is obligated to pay for them,” the lawsuit states. “But in blatant breach of its contractual obligations, defendant has failed to pay for these losses and expenses.”
Automatic Seafood closed its doors temporarily in March, as mandated by Gov. Kay Ivey, to help stop the spread of the coronavirus. The restaurant filed a claim with Cincinnati Insurance Company on March 30 seeking coverage for payroll, bills and other expenses, “but contrary to the plain language of the policy, and to Defendant’s corresponding promises and contractual obligations on or about April 29, 2020, defendant has refused to pay for plaintiff’s losses and expenses under the terms of the policy,” Automatic Seafood’s complaint states.
Business interruption insurance is part of a business owner’s policy. It provides coverage of payroll and other operating expenses in the event the business has to temporarily close due to a disaster. Examples include fires or tornadoes. But many insurers are rejecting business interruption claims related to COVID-19 closures saying the polices don’t include closures due to pandemics. Their argument is that there is no physical damage to the establishments that would then fall under the polices’ offerings.
This thin line has left many small and mid-sized businesses across the country in a lurch, struggling from losses due to closures they had no control over. Many, like Automatic Seafood, have filed lawsuits against their insurers alleging breach of contract. Some lawmakers have also gotten involved, threatening to force insurance companies to pay up if they don’t do the right thing and help out their clients.
Beasley Allen is actively pursuing cases with clients whose insurance companies denied their business interruption claims. Dee Miles, Head of our Consumer Fraud Section, Rachel Boyd and Paul Evans are spearheading this litigation for our firm. They would like to talk to you about any potential claims. Contact us for a free consultation regarding your business interruption insurance claims.