Dallas fine-dining restaurant Salum has sued its insurance company for denying business interruption coverage related to the coronavirus pandemic and the city’s stay-at-home orders.
In a lawsuit filed in Dallas federal court on Friday, Salum alleges Connecticut-based Travelers Indemnity Company wrongfully denied a claim submitted by Salum despite the restaurant purchasing the proper policy to protect it from business interruption.
The lawsuit is representative of the insurance disputes that are arising across the U.S. as the national debate heats up about which claims insurers should and should not be responsible for covering for businesses amid the COVID-19 crisis. According to Hunton Andrews Kurth’s COVID-19 Complaint Tracker, about 60 such lawsuits have been filed in courts nationwide.
Travelers cited several reasons for denying coverage, including that Salum reported “no physical damage” and that Salum had not suffered a cessation of business because, “although all dine-in service was ordered suspended, it was still legally permissible for customers to approach the premises to pick up take-out orders,” the lawsuit says. Travelers also said the policy does not cover loss or damages caused by viruses.
Salum disputes Travelers’ reasoning in its lawsuit. The restaurant says that because it “never had a take-out or delivery service clientele,” the City of Dallas’ stay-at-home orders that began in March have caused a “suspension of business at Salum.”
Salum said Travelers’ March 30 denial letter was inaccurate because the letter quotes language that is not in the restaurant’s policy. Salum also claims Travelers defies the very language in the policy that indicates the restaurant should be covered.
“Despite its knowledge that Salum’s property was contaminated by the virus and Salum sustained business income loss as a result, Travelers stated that there was no covered loss to the insured parties,” the lawsuit says.
Moreover, Salum claims Travelers failed to conduct an investigation into the restaurant’s business income loss before denying its insurance claim.
Salum also cites recent scientific evidence that estimates that the virus can “physically infect and stay on surfaces” for up to 28 days.
“The physical contamination of surfaces with communicable Coronavirus is a well-recognized cause of physical damage and a reason that civil authorities have issued quarantine orders,” Salum says.
The lawsuit asks the court to declare that the Travelers policy provides coverage for Salum’s property loss and seeks damages for breach of contract, violation of the Texas Insurance Code and breach of Travelers’ duty of good faith and fair dealing, which if proven would warrant an award of punitive damages.
“Travelers’ acts and omissions constituting a breach of the duty of good faith and fair dealing were and continue to be committed with actual awareness that they were wrongful and that they are inflicting harm on plaintiff,” the lawsuit says.
In a statement to The Texas Lawbook, a Travelers spokesperson noted “very specific exclusions” in the insurer’s business interruption coverage for its commercial property policies that state “losses from a virus or bacteria are not covered.”
“We recognize that the spread of COVID-19 has affected many of us in ways we never could have expected, and we are taking many steps to support our customers, agents, brokers and communities during this difficult time,” the statement said.
Salum is being represented by Matthew McCarley, Misty Farris, Majed Nachawati and Ann Saucer of Fears Nachawati and Jennifer Lemaster of Lemaster & Ahmed.
The case is 3:20-cv-01034-L and has been assigned to U.S. District Judge Sam Lindsay in the Northern District of Texas.