Boston, Massachusetts, U.S.A.-based restaurant chain Legal Sea Foods is suing its insurance company over failure to cover business losses the seafood chain incurred from the COVID-19 pandemic.
Like many other full-service restaurants across the United States, Legal made the decision to temporarily close its doors in mid-March after Massachusetts issued a “stay-at-home” order. The state’s governor ordered a closure of restaurants’ dining rooms, but restaurants are allowed to offer take-out and delivery options.
The stay-at-home order and the transmission of COVID-19 have had a “devastating effect on Legal Sea Foods’ business,” Legal said in the complaint filed in U.S. District Court in Massachusetts.
“Legal Sea Foods is no longer permitted to operate its dining rooms and is restricted to carry out or delivery services,” the company said. "Carry-out or delivery services are not feasible for Legal Sea Foods given its menu, brand, and business, all of which were known to Strathmore [Insurance Company] when it underwrote and agreed to insure Legal Sea Foods.”
In fact, Strathmore knew about COVID-19’s impact on people and businesses in China, Italy, and other countries when it issued the insurance policy to Legal on 1 March, 2020, Legal said.
The policy provides business income and extra expense insurance coverage up to around USD 94.9 million (EUR 88 million). Legal did not list the total of its business losses in court documents.
The policy covers direct physical loss of or damage to Legal’s property, the actual loss of business income the restaurant chain sustains due to the necessary suspension of its operations, and other losses. It does not contain a pandemic exclusion, “even though Strathmore could have included such an exclusion in the policy,” Legal said.
“By the policy’s plain terms, Legal Sea Foods’ inability to use its insured premises to operate its business due to COVID-19 is sufficient to trigger business income and related coverages,” Legal said.
Strathmore denied Legal’s claim shortly after it was submitted on 23 March, 2020.
Legal’s losses “do not constitute physical loss of or damage to either covered property at the described premises or damage to any property in the surrounding area which would limit access to the insured location(s),” Strathmore said in a letter to Legal.
Strathmore also said it would not pay Legal for food that was spoiled or contaminated as a result of the cessation of its business due to the coronavirus.
“Unfortunately, your policy only provides coverage for spoilage/contamination that results from either a change in temperature caused by a mechanical breakdown or from contamination by a refrigerant, and therefore spoilage/contamination coverage does not apply based upon the facts provided,” Strathmore said in the letter.
“We were forced to file this lawsuit because our insurer, Strathmore Insurance Company, wrongfully refused to cover a loss that it plainly chose to accept only weeks ago," Legal Sea Foods President and CEO Roger Berkowitz said in a statement emailed to SeafoodSource.“Strathmore priced and sold the policy to us after knowing about COVID-19 and the impact it was having on businesses in China, Italy, and elsewhere, yet it sold the policy without any relevant exclusion whatsoever. Our claim is based on the damage to property caused by COVID-19 [as well as] the civil authority (stay-at-home) orders that resulted from that damage.”
Photo courtesy of Legal Sea Foods
