A growing number of business owners in Texas have filed lawsuits against insurance companies for unfairly rejecting coverage for business interruptions due to coronavirus.


Hundreds of COVID-19 Lawsuits Filed Nationwide

Federal judges will soon decide whether to centralize hundreds of COVID-19 Texas, Florida, New York, and other states into a Multi-District Litigation (MDL).

Like a class action, the MDL would streamline litigation involving insurance companies who rejected billions of dollars in coverage for business interruptions due to the coronavirus pandemic. Click here to read more.

In-N-Out Sues Insurer for $250 Million After Rejecting COVID-19 Coverage

In June 2020, In-N-Out filed a $250 million lawsuit against Zurich American for rejecting coverage for the COVID-19 pandemic. In-N-Out is a California-based fast food chain that has several restaurants in Texas.

In-N-Out has “all risk” insurance that specifically includes “entirely unknown and novel risks that may arise which were not previously considered by the company.”

San Antonio Barbershop Files Lawsuit Against Insurance Company

One of the first business interruption lawsuits in Texas was filed by a barbershop owner in San Antonio against his insurance company, State Farm Lloyds. He estimates that coronavirus “stay-at-home” orders cost his 7 shuttered barbershops $1 million in revenue.

Texas Hair Salon Files Business Interruption Lawsuit

Hair Goals Club, a boutique wig and hair extension salon in the Houston suburb of Humble, Texas, opened in November 2019 — and it was forced to close 4 months later due to the coronavirus outbreak.

Her business was forced to close when local officials shut down all non-essential businesses. After her insurer rejected her claim for unexpected losses, the owner filed a federal lawsuit against the company.

The lawsuit was filed in the District Court for Harris County, Texas — DGA Hair Goals Club v. Twin City Fire Insurance Co.Case No. 2020-19538.

What is Business Interruption Insurance?

Business interruption insurance generally covers financial losses that occur when a company is unable to do business due to direct physical damage or loss of property — typically after disasters like tornados.

Does My Insurance Cover Coronavirus Losses?

Without any physical damage, many insurance companies are arguing that normal business interruption policies do not apply for financial losses caused by coronavirus illnesses and deaths, bans against non-essential workers, school closures, or “stay at home” orders.

After the SARS outbreak in 2002 and 2003, many policies were updated to specifically exclude coverage for viruses and pandemics.

Some business interruption policies provide coverage for “civil authority” orders that restrict access to property. The typical example is a street closure, but it could extend to “stay at home” orders.

What Other Insurance Coverage Might Apply?

  • Contingency Business Interruption Some businesses may have insurance that covers indirect losses due to customers or suppliers. This is more common for businesses with international supply-chains.
  • Event Cancellation: This covers economic losses due to cancellation of a scheduled event. Some policies specifically exclude viruses, pandemics, and epidemics.
  • General Liability: This covers bodily injury lawsuits from 3rd parties. There could be exclusions for communicable diseases like coronavirus.
  • Workers’ Compensation: This pays for medical bills and some income for employees who are injured or get sick at work. The claims are reviewed on a case-by-case basis to determine whether the infection actually occurred at work.

File a Complaint With Texas Department of Insurance

The Texas Department of Insurance recommends that business owners file a complaint when a company clearly violates the terms of a policy — but they may not always be able to resolve disputes. “Business interruption policies are the subject of ongoing litigation, including multiple federal class action lawsuits, related to the COVID-19 outbreak.”

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“Collen’s amazing success in the courtroom and well known dedication to his clients has earned him the recognition of his peers as one of The Top Trial Lawyers in Texas.”

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