Florida Class-Action Suit Seeks To Force Insurers To Pay Out 'All Perils' Policies

The Miracle Theater in Coral Gables opened in 1948 and has been a Miami-area landmark ever since. But its stages have been empty and its lights dark since mid-March, thanks to the coronavirus.

Actors Playhouse Productions, the company that runs the theater, on Monday filed a federal lawsuit against its insurer, Paris-based SCOR SE, over a failure to pay business interruption insurance even though it had an "all risk" premium policy that should have protected it against all perils unless they were specifically excluded. The coronavirus wasn't.

Law firms Podhurst Orseck and Boies Schiller are both representing the playhouse and filed suit in the Southern District of Florida and will seek to build a class on behalf of other businesses that likewise suffered pandemic-related losses, only to have their claims denied by insurance companies.

Steven Marks, an attorney with Miami-based Podhurst Orseck, said his firm has reviewed about 400 insurance policies since the coronavirus triggered a slew of disputes.

Under normal times, Marks contends, insurers would have easily covered such claims, but because they're facing so many of them, the industry is collectively trying to shirk payouts, he alleged. He compared it to the SARS epidemic of 2006 when similar claims were indeed paid.

"When the impact was smaller, economically, they stood up and did the right thing and paid claims without reservation or hesitation," he said. "From a technical standpoint, coronavirus is a SARS virus."

Marks said that following the SARS incident, insurers through their trade organizations, developed options and language that could specifically exclude coverage for viruses and bacteria. But some companies have paid premiums to be covered for all perils.

Marks believes the industry as a whole is denying claims and telling brokers that they should tell the insured not to even bother filing claims because they won't be covered. A similar class-action suit was filed in May against Travelers in California.

"It's almost a conspiracy industry-wide," he said. 

The attorney doesn't think the defendants will use force majeure clauses as a defense.

"The act of god is not a valid defense in most situations," he said. "For example in South Florida, a hurricane is an act of god, but we insure against it all the time."

The whole point of insurance is to protect against unusual, rare occurrences, he said.

According to the complaint, the playhouse's policy "also provides 'Extra Expense' coverage, under which Defendants promised to pay expenses incurred to minimize the suspension of business. Additionally, the Policy provides 'Civil Authority' coverage, under which Defendants promised to pay for loss of business income caused by the action of a civil authority prohibiting access to the theatre ... Consistent with the all-risk nature of the Policy, Defendants specifically agreed to pay for all losses caused by “Covered Causes of Loss,” defined as “direct physical loss” unless the loss is excluded under the Policy." 

Marks said the insurance company is contending that there was no physical damage to the property and that is a condition of payment. But he compared the playhouse's situation to times when a fire at one business forces surrounding businesses to close — there may not be physical damage to those businesses, but they still had business interrupted. 

On July 30, a federal court's multi-district litigation panel will hold a hearing to consider whether 100-plus similar federal cases over business interruption should be consolidated. Marks thinks that's unlikely, given that there are many insurance companies, slight differences in policy language and different laws across 50 states.

The Actors Playhouse suit doesn't specify a dollar figure for damages, which are increasing each day, Marks said. Even when the theater reopens, it can't be at capacity because of social distancing, he said. 

As he was hanging up, Marks got a text alert that certain members of Congress were working to restrict coronavirus-related lawsuits.

"It's typical of the Republican Party to try and hurt and restrict consumer rights in favor of large corporations and big donors," he said. But, he said, "there is a U.S. Constitution which prohibits retroactive impairment of contracts."

No one responded to a media request submitted through SCOR's website Tuesday. 

Contact Deirdra Funcheon at deirdra.funcheon@bisnow.com.