Hotel and bar operator accuses Zurich of bad faith in new lawsuit

Insurance company is using the pandemic "as a shield and sword," plaintiffs argue

Hotel and bar operator accuses Zurich of bad faith in new lawsuit

Insurance News

By Lyle Adriano

The owner of a Chicago hotel has filed a lawsuit against Zurich American Insurance Company, accusing the insurer of wrongful and bad faith denial of insurance coverage.

The lawsuit, filed in the Circuit Court of Cook County by operator ECD-Great-Street DE, claimed that Zurich denied its claims related to the physical damage and extended closure of theWit hotel resulting from the events of civil unrest that occurred in Chicago on May 30, 2020.

As a result of the damage, theWit hotel – along with its in-house bar ROOF and restaurant State & Lake – were forced to shut down for the entire summer and early fall. Both periods, the operator claimed, were peak seasons for business. The hotel later reopened in October.

The lawsuit also cited Illinois Governor J.B. Pritzker’s statement on June 08, 2020 that “insurance companies must do everything in their power and are obligated to give their customers the funds they need to rebuild and get back on their feet as soon as possible.” On that same day, the Illinois Department of Insurance issued Company Bulletin 2020-15, which directed (among other requirements) all insurers licensed to transact insurance business in the State of Illinois to “base payouts” of business interruption claims related to damage caused by the civil unrest “on business activity levels that eliminate the impact of COVID-19.”

ECD-Great-Street DE’s lawsuit alleged that Zurich ignored the terms of the insurance policy and the directive of the Department of Insurance to disregard the impact of the coronavirus in making payment of the income lost by the hotel following civil unrest.

“Zurich’s conduct is even more appalling,” the lawsuit said, since “it has almost universally denied its policyholders’ claims for business interruption coverage related to COVID-19.”

“In short, in the most cynical fashion, Zurich is using the pandemic as a shield and a sword by denying US businesses’ coverage for their lost income resulting from COVID-19 while simultaneously leveraging the pandemic to wipe out coverage for other catastrophic losses and business closures, including those resulting from the May 30, 2020 events of civil unrest,” the lawsuit continued, additionally alleging that had the insurer had its way, COVID-19 “will turn out to be a serendipitous boon to its bottom line.”

The lawsuit seeks a declaratory judgment from the Court that Zurich has a duty to pay all amounts submitted or to be submitted by ECD-Great Street DE for payment. The lawsuit also seeks a ruling that Zurich has breached the insurance policy and has acted “vexatiously, unreasonably and in bad faith in violation of Illinois’ insurance bad faith statute,” the complaint said.

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