Appeals court: NY Botanical Garden can go forward with COVID business interruption suit
A New York state appeals court is allowing the New York Botanical Garden to go forward with a business-interruption loss suit against an insurer that refused to pay for losses due to COVID-19 shutdowns.
A New York appeals court will allow the New York Botanical Garden to continue with a lawsuit against its insurer for their refusal to pay for losses the site suffered due to mandated COVID-19 closures.
The same unanimous panel of justices has also gone a step further, allowing the Botanical Garden to also proceed past the motion-to-dismiss stage with a related breach of the implied covenant of good faith claim.
The Appellate Division, First Department court has ruled that the Bronx-based Botanical Garden has stated a claim for breach of the implied good-faith covenant, “by alleging that defendant [Allied World Assurance Company] did not conduct a complete or fair investigation of [the Botanical Garden’s] claim [for COVID-19-related losses], had no meritorious basis for denying the claim, and simply denied it in accordance with a business policy of denying COVID-related business interruption claims.”
The panel of five justices affirmed an October 2021 opinion from Bronx County Justice Eddie McShan that denied Allied World Assurance’s motion to dismiss the Botanical Garden’s complaint filed in March 2021.
The appeals court also allowed the Garden to proceed with a breach of contract claim against Allied World, while noting that that the implied covenant claim is “not duplicative” of the breach claim “since, although there is some overlap in the facts alleged, it relies upon different facts and seeks different damages from the contract claim.”
The panel’s opinion mostly focused on whether the Botanical Garden could proceed past the dismissal stage with its central claim that Allied World had wrongfully denied its coverage-claim for “contingent business interruption” under a policy with the insurer.
The Botanical Garden is normally open to the public, and it features a “museum of living plant collections arranged in gardens and landscapes across its National Historic Landmark site,” according to its website.
The panel explained that Allied World had issued a “Pollution Legal Liability” policy to the Botanical Garden and that under the policy, “‘contingent business interruption’ was defined as ‘the necessary suspension of your business operations at a location owned or leased to you as a result of an order by a government body or authority denying access to the location … provided that the suspension and the order must be ‘caused solely and directly by a pollution incident on, at or under an independent location.’”
The panel further wrote that the Botanical Garden had sought policy coverage for losses it said “resulted from governmental orders shutting down its operations in response to COVID-19,” and that Allied World had “denied the claim in full” but it acknowledged that “COVID-19 constitutes a ‘pollution incident’ as defined in the Policy.”
In analyzing whether the Botanical Garden’s lawsuit claim for a declaration that Allied World was required to pay for business-interruption losses, the panel wrote that Allied had ”failed to establish that, under the terms of the insurance policy it issued to plaintiff, contingent business interruption coverage was available only if plaintiff was completely denied access to its property.”
“The policy contemplates coverage for periods when plaintiff would have some temporary access to the property,” the panel continued, “including periods involving potential partial resumption of operations to mitigate damages, which for plaintiff included maintaining its extensive plantings” at its site in the Bronx.
Kevin Haas, a partner at Clyde & Co based in New Jersey, represented Allied World, according to the First Department opinion. Her could not be reached for comment.
John Kazanjian, a managing principal at Beveridge & Diamond in New York, represented the Botanical Garden. He declined to comment.