Retailer Launches Class-Action Lawsuit Over Business Interruption Losses

A San Francisco retailer has filed a class-action lawsuit against Travelers, alleging the insurance company wrongfully denied the retailer's claims for business interruption relief after its mandated closure due to the coronavirus pandemic.

Mudpie, a children's clothing boutique, claims small businesses have been wrongfully denied coverage by Travelers for losses related to government-mandated shelter-in-place orders, despite paying business interruption premiums. 

Business interruption insurance has been a touchy subject for businesses and insurers since the onset of the coronavirus pandemic and government efforts to contain it. Mudpie follows a number of businesses taking the issue to court, with Travelers joining multiple companies denying interruption claims. 

Nationwide, hundreds of billions of dollars are at stake. In April, David A. Sampson, president of the American Property Casualty Insurance Association, a leading trade group for the insurance industry, told The Washington Post that combined claims from small businesses could total more than $430B per month during the pandemic.  

Mudpie, which has been family-owned since 1976 and is based on Fillmore Street in San Francisco's Pacific Heights neighborhood, is represented by California-based Gibbs Law Group and Cohen Milstein Sellers & Toll. 

"This type of crisis is precisely why small business owners purchase business interruption insurance to provide themselves and their employees added protection during times of need," Cohen Milstein Sellers & Toll partner Geoffrey Graber said in a statement.

"Retailers and other small business owners who have paid business interruption insurance premiums should expect insurers to fulfill the obligations to which they mutually agreed,” he said.

A spokesperson for Travelers did not respond to a request for comment.