Businesses hurt by pandemic-related shutdown orders are increasingly taking to the courts in a bid to enforce insurance policies covering business interruption or loss of income, with a proposed class action filed Monday on behalf of hotel groups including Best Western and Hampton Inn being the latest example.
Monday’s lawsuit, filed against Aviva Insurance Company of Canada by London, Ont.-based Lerners LLP, alleges Aviva was “in breach of contract when it denied the hotels’ loss of business income coverage after the federal and provincial governments declared states of emergency, restricting their business, due to the outbreak of COVID-19,” the law firm said in a statement.
- Ottawa in talks with Lloyd’s of London for insurance partnership to withstand ‘black swan’ events
- COVID-impact survey shows signs of recovery, but businesses will keep tight watch through fall
- Airlines need aid or ability to fly to escape ‘catastrophic territory,’ Air Canada CEO warns
The class-action claims, if certified by the courts, would apply to all hotels that were insured under a commercial insurance policy issued by Aviva under its hotel program, Lerners said.
A spokesperson for Aviva said the company understands that the hospitality industry has been “severely impacted” by the COVID-19 pandemic.
“Unfortunately in this instance there is no coverage for provincial-wide shutdown orders as a result of a worldwide pandemic,” she said, adding that she could not comment further because “this matter is in litigation.”
The lawsuit comes just a few weeks after another Canadian firm that specializes in class actions, Koskie Minsky LLP, filed a similar lawsuit on behalf of a handful of retailers.
That proposed class action suit, filed July 6 in the Ontario Superior Court of Justice, named a number of property and casualty insurers including Aviva, Co-operators General Insurance Co., Desjardins General Insurance Services Inc., Economical Mutual Insurance Co., Lloyd’s Canada Inc., and Travellers Insurance Company of Canada. Representative members of the proposed class include a number of Booster Juice operators and a pair of optometry businesses.
The lawsuit seeks declarations the insurers “breached the terms” of contracts set out in business interruption policies, and “acted in bad faith in not fulfilling Business Interruption insurance during the pandemic.”
Due to the outbreak and efforts to control the spread of the respiratory virus COVID-19 in Canada, class members “suffered and continue to suffer severe economic losses,” the suit says, adding that the plaintiffs in the case purchased insurance “for these types of events and the resulting losses suffered.”
However, it alleges that the defendants have “refused to honour their agreements with class members and have refused to cover such business losses,” sometimes before formal claims were even made, “frustrating any attempt to permit claims under the contracts.”
Neither proposed class action has been certified by the courts, and none of the allegations have been proven.
Since the COVID-19 outbreak was declared a pandemic by the World Health Organization in March, disputes between businesses and their insurers have landed in court in Canada, the United States and Europe. Many companies have been denied coverage under business interruption insurance policies because such policies often include language that assumes business is interrupted due to physical damage to premises.
In an interview with the Financial Post this month, John Neal, chief executive of Lloyd’s of London, said some insurers have designed coverage specific to pandemics but there has historically been little uptake. He noted that after an Ebola outbreak in West Africa in 2014 threatened to spread widely, German reinsurer Swiss Reinsurance Company Ltd. offered a pandemic product that got no uptake whatsoever.
“Nobody bought the coverage — not a single customer,” Neil told the Post.