Hotel hires leading class-action law firm to sue all subsidiaries of Farmers Insurance Group for stranding small businesses that paid thousands for insurance policies promising to protect them in times like this
A Modesto hotel has filed a class-action lawsuit against all Farmers Insurance companies – Farmers Insurance Exchange, Truck Insurance Exchange, Mid-Century Insurance Company, and Fire Insurance Exchange – accusing them of denying coverage under their business protection policy amid the outbreak of COVID-19 and mandated business closures, according to attorneys at Hagens Berman.
Unlike other COVID-19 suits, this lawsuit goes after all Farmers Insurance Group companies based in California because they all use similar forms and procedures, which allows the cost of litigation to be spread over a wider net, reducing costs for all involved. This novel approach pursues an underlying claim that, despite paying thousands of dollars for business interruption coverage for "all risks" coverage, insureds were denied coverage following orders that required physical alterations and restricted or limited business operations, use of or access to facilities, and in-person social interactions.
"Defendants’ insureds dutifully paid premiums to Defendants—some doing so year-after-year, to the tune of thousands or even tens of thousands of dollars per year—so that when the unimaginable hit, they would be protected," the lawsuit states. "Though Defendants assure prospective customers that Farmers has ‘a solid reputation for doing the right thing for the right reason,’ Defendants have proven during the COVID-19 pandemic that this reputation is undeserved."
The lawsuit filed by American Traders Inc., the owner and operator of the Modesto Hotel, is against its insurer, Truck Insurance Exchange, but also includes other Farmers subsidiaries, including Fire Insurance Exchange and Mid-Century Insurance Company, accusing them.
The law firm is asking to represent small business owners in a class-action lawsuit against Farmers. If you have business interruption or supply chain interruption coverage for your business and have suffered a decline in revenue or been denied an insurance claim, find out more about the lawsuit and your rights.
American Traders Inc.’s coverage should cover every one of those unimaginable risks unless the policy exclusions removed that risk from coverage, according to the lawsuit.
"Small businesses pay a high dollar for ‘all risk’ business protection policies for a reason: to ensure that when the unthinkable happens – a major threat to their business, their passion, their livelihood – that they will have a safety net," said Rob Carey, a Hagens Berman partner. "Farmers Insurance has breached its duty to its customers, choosing to abandon them in their time of need – the middle of a global pandemic."
"Businesses across the country have been subjected to orders that have limited their operations, their ability to conduct business, and their customer interaction as well as forced them to modify their physical spaces. They now have to apply chemicals and ensure physical distancing, which disrupts day-to-day business operations," Carey added. "We believe Farmers is liable to its customers who purchased these policies and dutifully paid their premiums."
According to the complaint, the policy in question includes coverage for loss of income, extra expense, property, liability and other coverages – "'for any peril, imaginable or unimaginable, unless expressly limited or excluded" – and has cost American Traders, Inc. $31,070 a year.
The lawsuit states, "Defendants’ interpretation of the policy contract is wrong, and its denial of coverage for losses caused by limitations on the physical use and access to insureds’ property breached the contract."
The suit seeks compensatory and statutory damages, and attorneys’ fees, interest, and declaratory relief and was filed June 4, 2020, as a complex case in the Superior Court of California, County of Stanislaus.
"Rather than giving equal consideration to the interests of the insureds, as Defendants must do, evaluating each claim based on all information that could be gathered from a fair and neutral individualized investigation, as Defendants also must do, or securing an outside counsel opinion on coverage to avoid bias, as industry standards require, Defendants decided their denial decision was correct and that no other reasonable interpretation of the policy language to the contrary exists, and thus all claims related to governmental orders limiting the use of or access to insureds’ property were invalid," the suit states.
Small Businesses Taking on Insurance Companies
Hagens Berman is investigating the rights of entrepreneurs and small businesses suffering from sudden unforeseen loss of business, supply chain interruption and event cancellations due to the outbreak of the novel coronavirus, COVID-19.
"Fifty percent of small businesses have reported that they could shutter after three months of a COVID-related shutdown. It’s no secret businesses across the nation are suffering in a way never before seen," said Steve Berman, Hagens Berman’s Managing Partner. "We want to do everything in our power to support small businesses against insurance bad faith and uphold their rights under business protection policies."
Hagens Berman Sobol Shapiro LLP is a consumer-rights class-action law firm with nine offices across the country. The firm’s tenacious drive for plaintiffs’ rights has earned it numerous national accolades, awards and titles of "Most Feared Plaintiff’s Firm," and MVPs and Trailblazers of class-action law. More about the law firm and its successes can be found at www.hbsslaw.com. Follow the firm for updates and news at @ClassActionLaw.