As observed from the numerous COVID-19 first-party property cases that have already been filed, insureds are claiming insurers have denied their business interruption claims in bad faith. Whether the applicable jurisdiction limits bad faith damages via statute or allows such damages consistent with punitive damages, insurers must ensure their adjusters are handling these COVID-19 claims in good faith.
In a recent COVID-19-related case, a bad faith claim was asserted along with a breach of contract claim in Big Onion Tavern Group, LLC, et al. v Society Ins. Co. (No. 120-cv-02005), filed in the United States District Court for the Northern District of Illinois. The plaintiffs in Big Onion are separate businesses that operate in the Chicago area and had in place business interruption insurance from Society Insurance. The basis of the plaintiffs’ claims in Big Onion originate with Illinois Governor J.B. Pritzker’s March 15, 2020 order closing all restaurants, bars, movie theaters, etc., to help stop the spread of COVID-19. The suit seeks coverage under the plaintiffs’ commercial business insurance policies, “which provide coverage for losses incurred due to a ‘necessary suspension’ of their operations, including when their businesses are forced to close due to a government order.” Further, the suit asserts that the Society Insurance policy promises to cover their losses when the government forces closure interruption of their businesses and does not exclude contamination due to communicable disease and/or viruses.