Scratch Restaurants LLC on Wednesday sued its insurer Farmers Group Inc. for coronavirus-related business interruption coverage, joining a growing list of shuttered restaurants seeking coverage under their commercial insurance policies.
In a suit filed in California Superior Court in Los Angeles, the restaurant group, which includes the Scratch Bar & Kitchen, seeks a declaratory judgment on whether its business interruption coverage responds to government-imposed closures.
According to the suit Scratch Restaurants LLC et al v. Farmers Group Inc. et al, authorities in Los Angeles and Santa Barbara, where the restaurants are located, last month restricted dine-in services and issued stay-at-home orders that resulted in the Scratch Restaurants losing revenue and furloughing 55 workers, court documents say.
A ruling in Scratch’s favor “will prevent the Plaintiff from being left without vital coverage acquired to ensure the survival of their businesses due to the shutdown caused by the civil authorities’ response,” court papers say.
Brian S. Kabateck, managing partner at Kabateck LLP, who represents Scratch, said that in California “the deprivation of use of a property is sufficient to constitute damage.”
Farmers, a unit of Zurich Insurance Group, did not immediately respond to a request for comment.
The suit is the latest by a hospitality sector business suing for business interruption coverage for revenue lost during the COVID-19 pandemic.
Earlier this week, Billy Goat Inn Inc., which operates Chicago’s Billy Goat Tavern bars and restaurants, filed a suit seeking class action status to obtain business interruption coverage from its insurer, Society Insurance Co. in Fond du Lac, Wisconsin. Last week, another group of Chicago restaurants also sued Society for coverage. Earlier last month, restaurants in New Orleans and California and casinos in Oklahoma also went to court seeking business interruption coverage for losses during the pandemic.
While each lawsuit differs, common themes include assertions that the properties suffered physical damage, which triggers coverage under the civil authority clauses of the policies.
On Wednesday, the law firm that brought the New Orleans suit, Gauthier, Houghtaling LLP, announced the formation of the Business Interruption Group, which, according to its website, is a nonprofit “that insists insurers pay owed business losses caused by the coronavirus” and supports federal subsidies for insurers that pay the losses.
Founding members of the group include chefs Thomas Keller, Wolfgang Puck, Daniel Boulud, Jean-Georges Vongerichten, Jerome Bocuse, Dominique Crenn and Edouardo Jordan, according to the site.
Since the onset of the pandemic in the United States, several insurance organizations and attorneys have asserted that most standard property insurance and business interruption policies exclude losses stemming from infectious diseases.
Insurers, brokers and corporate policyholders also have pressed for the creation of a federal fund to provide liquidity to businesses hit by the pandemic.