Business interruption cover litigation gets a new twist

COVID-19 lawsuit cases are flooding in over in the US, but in this one an insurer is suing its insured - over its broker's actions

Business interruption cover litigation gets a new twist

Insurance News

By Lyle Adriano

In a sudden role reversal over in the United States, an insurer has filed a lawsuit against a policyholder over a business interruption coverage issue.

US Specialty Insurance Company (USSIC) alleges that research and advisory firm Gartner is attempting to change part of its policy to recoup more than the amount its current contract stipulates.

Gartner hosts events and conferences worldwide, and purchases insurance to cover those events.

USSIC filed two cases in Texas federal court on May 27 over two separate event cancellation policies, maintaining that Gartner cannot receive payments totaling more than the contracts’ indemnity limits. USSIC also argued that Gartner cannot increase those limits to account for COVID-19 related losses, and cannot obtain coverage for new events not previously named in the policy.

The insurer alleged in its first lawsuit that it has “preliminarily” accepted claims from Gartner on the 2020 policy for events through August. Those claims totaled as much as $164.7 million in potential proceeds – but the policy’s indemnity limit is $150 million. USSIC also said that for the second policy, it is reviewing claims that potentially go $20 million more than the indemnity limit.

According to USSIC, Gartner had its broker submit requests to reinstate indemnity limits. This would allow Gartner to use those amended limits for claims on unrelated events and conferences, which USSIC argued would exceed coverage limits.

“No provision of the policy entitles Gartner to increase the Aggregate Limit of Indemnity,” USSIC’s lawsuit said. The insurer added that while the policy allows Gartner to secure additional coverage within indemnity limits in certain cases, “the policy does not permit Gartner to secure additional coverage where, prior to inception of that coverage, Gartner was aware of circumstances—such as the COVID-19 pandemic—that may lead to a claim.”

David Halbreich, Reed Smith LLP insurance recovery practice chair, said that lawsuits against policyholders could be a reflection of insurers fighting back on pandemic-related insurance disputes.

“Sometimes there’s a race to the courts to lock in a position that’s more favourable,” Halbreich told Bloomberg Law.

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