The Broadway theater group Jujamcyn has filed a lawsuit against its two insurers, alleging they wrongfully denied its business interruption claim for COVID-19 losses stemming from the state-ordered shutdowns.

business closed covid 19 375x210 Broadway theater group sues insurers over rejected business interruption claimsOn March 12, New York Governor Andrew Cuomo issued a statewide order barring gatherings of more than 500 people – a measure taken to curb the spread of COVID-19. The restriction effectively suspended shows in all 41 Broadway theaters, including Jujamcyn’s five successful Broadway productions: “The Book of Mormon,” “Hadestown,” “Moulin Rouge: The Musical,” “Mean Girls,” and Disney’s “Frozen,” which permanently closed in May as “a result of the industry-wide shutdown and resulting economic fallout.”

Jujamcyn estimates it will have lost nearly $30 million by the end of the year. It has sought relief from its insurers, Federal Insurance Company and Pacific Indemnity Company, both of which are part of the Chubb Group of insurers.

Rejected all-risk claims

The company first filed a claim with Federal Insurance Co. for COVID-19 shutdown losses under its all-risk business interruption policy, but the insurer quickly rejected the claim, saying the losses were not a result of “direct physical loss or damage or due to the prohibition of access by a civil authority.”

The Broadway group then filed a claim with Pacific Indemnity for business interruption losses. The insurer paid Jujamcyn $250,000 on the claim, but it was just a small fraction of the amount the company needed and felt it was owed.

Jujamcyn Theaters filed a lawsuit against the insurance companies in the U.S. District Court for the Southern District of New York, alleging its all-risk policy covers economic losses from “the actual impairment” of business and does not specifically exclude pandemics or viruses. The company also argues that Gov. Cuomo issued an executive order to close theaters.

Jujamcyn also argues that the pandemic has caused actual physical losses and/or damage because the virus can adhere to surfaces for days and linger in the air inside its theater buildings.

Uncertain future

“There is no date set or anticipated by which theaters will be permitted to reopen in any capacity. There is also no set date set or anticipated by which theaters will be permitted to reopen at full capacity (or if theaters will ever be permitted to do so absent, for example, the worldwide availability of a vaccine),” the complaint states, according to Broadway News.

The insurance industry’s blanket rejection of most business interruption claims during the COVID-19 pandemic has thrust thousands of businesses into a financial crisis.

“[Insurers have] seized upon excuses to abandon its insured in its time of need,” one of Jujamcyn’s lawyers wrote about the current suit, according to Risk & Insurance.

“Federal and Pacific knew, and publicly acknowledged, that they could be obligated to pay for massive losses in the event of a pandemic,” the lawsuit asserts. “Federal and Pacific also knew that they could use common and widely available exclusions to guard against being obligated to pay for pandemic-associated losses. However, they decided not to do so here, selling Jujamcyn the all-risks Federal Policy and all-risks Pacific Policy and deliberately omitting from the policies any potentially applicable exclusion associated with a virus-related pandemic.”

Business interruption insurance attorneys

Beasley Allen lawyers are actively investigating and filing claims against various insurance companies for denial of business interruption coverage during the COVID-19 pandemic. 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 multidistrict litigation (MDL) developments as they arise. Please contact them if you have any questions or would like to discuss potential claims.

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