Legal Sea Foods has filed a lawsuit against its insurer, who rejected the Boston-based restaurant chain’s damages claim regarding its financial losses during the coronavirus pandemic.
The restaurant alleges its “all risks” policy with Strathmore Insurance Co. protects the company from losses suffered when Massachusetts and states across the country forced restaurants into offering takeout-only service as a result of the public health crisis, The Boston Globe reports.
Attorneys for Legal Sea Foods say the policy does not have a pandemic exclusion — a clause that has become more frequent in such business interruption contracts in the wake of the 2003 SARS outbreak, according to the newspaper.
Legal Sea Foods, which filed the lawsuit in federal court in Boston Monday, signed the policy on March 1.
“They certainly would have known about (COVID-19)” at that time, Roger Berkowitz, chief executive of Legal, told the Globe.
Attorney Harry Manion, of Hunton Andrews Kurth, the law firm representing Legal Sea Foods in the case, said “a reasonable and prudent business person like Roger would infer that the policy would cover these losses” without a pandemic exclusion in the contract, according to the newspaper.
The company filed its initial claim on March 23, days after Gov. Charlie Baker ordered restaurants to suspend dine-in service, but it was rejected by Strathmore three days later, the Globe reports.
A rejection letter said the claim “does not constitute physical loss of or damage to either covered property at the described premises or damage to any property in the surrounding area which would limit access to the insured location(s).”
Strathmore denied the claim a second time as well.
Insurance companies have said business interruption coverage is intended and designed for other situations, such as fires and natural disasters that wreak physical damage, according to the Globe.
Thomas Hughes, executive vice president and general counsel for Greater New York Mutual Insurance Companies, Strathmore’s parent, told Boston.com Wednesday the company does not comment on pending litigation.
Berkowitz told the Globe that Legal Sea Foods — which has furloughed most of its workforce, or roughly 3,100 employees — did not calculate its losses that it was seeking reimbursement for, according to the newspaper. The restaurant chain opted not to provide takeout service in order to protect its workers, he said.
The insurance payout would assist the company in paying its employees and vendors, and if the restaurant is successful in its lawsuit, there could be precedent set for other restaurants to receive coverage, Berkowitz said.
“The restaurant business is a cash flow business,” he told the Globe. “You can’t pay people when you aren’t open. If this provides a road map for others, that would be a good thing.”
In the meantime, there’s also a pending bill on Beacon Hill that, if passed, would require insurance providers to cover business interruption as a result of the COVID-19 crisis. The proposal would also allow insurers to be reimbursed for their payouts from the state.
And Legal Sea Foods is hardly the first to take its insurer to court amidst the pandemic fallout. Bob Luz, president and CEO of the Massachusetts Restaurant Association, told the newspaper the lawsuit is among many filed by chain restaurants across the country.
“It’s not the first one nor will it be the last,” he said.
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An insurance claim for Legal Sea Foods’ losses during the COVID-19 pandemic was rejected. So it’s suing. - Boston.com
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