The Bend Hotel Development Company LLC, owner of the Hyatt House/Hyatt Place hotels at The Bend in East Moline, Illinois, has filed a lawsuit against Cincinnati Insurance Company for denying its COVID-19 business interruption insurance claim.

The hotel’s complaint states it “has been forced, by recent orders issued by the State of Illinois, to cease the majority of its operation — through no fault of its own — as part of the state’s efforts to slow the spread of the COVID-19 pandemic.”

Business interruption insurance is part of a business owner’s policy. It provides coverage for payroll and other operating expenses in the event a business must temporarily close due to a disaster. Bend Hotel Development Company said it purchased business interruption insurance from Cincinnati Insurance Company “to protect its business from situations like these, which threaten its livelihood based on factors wholly outside its control.” But Cincinnati Insurance Company said closures due to viruses are not covered by the policy. The hotel argues that’s not what its policy states, and it is suing its insurer for breach of contract.

Cincinnati Insurance Company says that since the hotels weren’t damaged, for example like they would have if a fire had broken out in the hotel, the business interruption claim has no merit.

That argument swayed judges in Michigan and Washington, D.C., who threw out lawsuits from businesses suing their insurers over COVID-19-related claims. But Western District of Missouri Judge Stephen R. Bough, on Aug. 12, sided with a group of restaurants suing their insurers when he found they had suffered “direct physical loss” when coronavirus particles landed on their establishments, damaging the property and rendering them unsafe for customers.

The Judicial Panel on Multidistrict Litigation also saw some merit in the restaurants’ argument and will consider creating smaller multidistrict litigations for claims against certain insurers, including Cincinnati Insurance Company.

Beasley Allen lawyers are actively investigating and filing 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 multidistrict litigation (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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