Ralph Lauren sues insurer for $700 million over restricted business loss claim

Fashion company accuses insurer of defrauding policyholders for using ambiguous policy language

Ralph Lauren sues insurer for $700 million over restricted business loss claim

Insurance News

By Lyle Adriano

Ralph Lauren is suing its insurer after the American fashion label was barred from claiming the full amount of its business loss insurance.

The fashion company saw first quarter losses of $112 million, and revenue dropped 66% overall compared to last year. Ralph Lauren’s wholesale business for the quarter also saw a staggering 93% drop.

When Ralph Lauren filed a claim for its financial losses resulting from the pandemic, its insurer Factory Mutual Insurance allegedly attempted to limit coverage. The fashion company had purchased the “all-risk” insurance policy just last year, which is worth $700 million.

In the lawsuit, Ralph Lauren alleged that Factory Mutual cited a clause in its contract involving “contamination,” which limits the scope of the policy’s coverage related to any claims around COVID-19; the insurer maintains that due to this clause, Ralph Lauren cannot claim on the full policy.

“To the extent Factory Mutual contends that the policy’s ‘contamination’ exclusion bars coverage for loss caused by ‘communicable disease’ or some other aspect of Ralph Lauren Corp.’s claim, the policy is ambiguous because it is susceptible to more than one reasonable interpretation and, therefore, must be construed in favor of coverage,” the fashion company’s lawyers said.

Ralph Lauren additionally alleged that it is not the only company being affected by this contamination clause, saying that Factory Mutual has even sent out “talking points” to all its representatives to make sure that such claims are denied for all policyholders. The clothing brand believes this approach constitutes fraud and breach of contract.

“The Factory Mutual talking points are intended to defraud policyholders from the coverage that each is contractually entitled to for the physical loss and damage to property caused by COVID-19,” the lawsuit said.

Women’s Wear Daily reported that Ralph Lauren is asking the court to declare that the company has full access to the $700 million amount, that there is no applicable exclusion, and that Factory Mutual violated the New Jersey Consumer Fraud Act. On top of the judgments, the fashion label is seeking damages in excess of $75,000.

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