WASHINGTON (Legal Newsline) - Venerable insurer Lloyd's of London is facing a courtroom battle against a national association for trial lawyers over its refusal to pay a $1 million claim over a canceled annual convention in Washington D.C.
The American Association for Justice bought $5 million in “Showstoppers” coverage from Lloyd's underwriters in July 2019 for its winter convention in New Orleans in February 2020 and its annual convention scheduled for July 9-15 in Washington. On April 17, however, D.C. authorities told the AAJ the convention center wouldn’t be available because it was going to be used as a temporary medical facility until at least July 15.
Several days later, AAJ notified Lloyd's it would be seeking $1 million to cover lost revenue from the convention under the Showstoppers policy, which cost around $13,000. Lloyd's rejected the claim in July, citing a “Communicable Disease exclusion” that covered cancellations because of quarantine, travel restrictions, advisories or warnings. It also denied coverage for cancellations due to “any threat or fear of any infectious or communicable disease in humans …whether actual or perceived."
The two sides negotiated for several months but in December Lloyd's said it would refuse to pay, specifically noting the Centers for Disease Control’s March 12 recommendation that gatherings of more than 250 people be canceled.
The AAJ, which counts among its missions preserving the right to trial by jury, sued in D.C. Superior Court on Feb. 23, requesting a jury trial. Lloyd's removed the case to federal court on March 29.
In its lawsuit, the AAJ argues the communicable disease exclusion doesn’t apply because it only mentions government-imposed quarantines and travel restrictions, not “recommendations” like the one the CDC made in March.
"The claim and loss do not arise out of governmental imposition of quarantine or restriction or movement,” the AAJ said, nor did the government issue a “travel advisory or warning.” The convention wasn’t canceled because of “any threat or fear of any infectious or communicable disease,” either, the AAJ added.
COVID-19 cases were spiking in Washington around the time city officials decided to make the Convention Center a medical treatment center, hitting a peak in early May.
Business policyholders have had mixed success with lawsuits seeking coverage for COVID-related losses under business-interruption policies, but several states are considering laws requiring insurers to pay out on those claims.