Lloyd's target of new event cancellation coverage lawsuit
The litigation revolves around whether the cancellation was a 'proximate cause' of COVID, as Lloyd’s asserted in its denial.
It’s been over one year since COVID-19 caused lockdowns worldwide, yet insurance coverage lawsuits continue to roll in for coverage denied during the pandemic.
A nonprofit group representing trial attorneys is suing Lloyd’s of London for failing to cover the cancellation of its annual conference after the convention center in Washington, D.C., was converted into a medical facility to treat COVID-19 patients.
At the heart of the legal dispute is whether the cancellation is a “proximate cause” of COVID-19, as underwriters at Lloyd’s of London claim in their denial of coverage.
Attorneys at Ballard Spahr and Paulson & Nace, representing the American Association of Justice, counter the event was protected by its “Showstoppers” policy, which includes language covering the requisition or confiscation of the event venue by local, state or national authorities.
“The underwriters did not provide any support for its statement that any restrictions on gatherings, rather than its use as a medical facility, led to the unavailability of the convention center,” according to the lawsuit. “Nor did the underwriters explain the relevance of ‘proximate cause’ to the policy and AAJ’s claim. The phrase ‘proximate cause’ is not used in the policy.”
According to the lawsuit, the showstopper policy includes a $3.1 million coverage limit for the event that was scheduled for July 8, 2020, through July 15, 2020.
The complaint was originally filed in D.C. Superior Court on Feb. 23 but was transferred to the federal trial court in Washington, D.C., on March 29.
Many events include insurance policies that cover various types of cancellations, but most include exclusions for pandemics, a lack of sales and other scenarios.
The events team at the convention center informed AAJ on April 17, 2020, that the Walter E. Washington Convention Center was being prepared as a temporary site to treat COVID-19 patients. By April 23, 2020, the D.C. events team confirmed the event was being canceled.
Lloyds, represented by Troutman Pepper Hamilton Sanders, initially denied a claim for coverage July 21, citing the Centers for Disease Control & Prevention’s March 12, 2020, recommendation that events with more than 250 people be canceled because of COVID-19, according to the lawsuit. By March 15, the CDC lowered that threshold to events with 50 people.
“The proximate cause of your client’s loss was the COVID-19 pandemic, which led to, among other things, restrictions on gathering,” according to a letter from the underwriters that was sent Dec. 8, that’s quoted in the lawsuit. “While there was an option to purchase a coverage extension for loss associated with cancellation as a result of communicable disease, your client declined to do so. As such, the policy does not afford coverage for this claim given the policy’s communicable disease exclusion.”
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