LA Sues Insurer For Alleged Coverage Denial for COVID Revenue Losses

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LOS ANGELES (CNS) - The City Attorney's Office has filed suit against an insurer to recover costs associated with business losses at airports and other locations during the pandemic, alleging the city had coverage up to $1 billion under the policy at issue, but that the company cited exclusions and wrongfully denied benefits in 2021.

The breach-of-contract suit against American Home Assurance Co. seeks unspecified damages as well as a judge's declaration of the rights and obligations of the parties. A representative for the insurer did not immediately reply to a request for comment on the suit brought Wednesday.

Of most importance to the city's claims are the operations of Los Angeles International Airport and Van Nuys Airport, as well as golf courses and other commercial properties, where the city has suffered substantial business revenue losses since the start of the pandemic, the suit states.

"As one stark example, LAX saw approximately 60 million fewer passengers in 2020 as compared to 2019, a decrease in traffic of over 67%," the suit states.

Business slowly improved during subsequent years, but the impact of COVID-19 on travel continues to the present, according to the suit.

During the same time, the city has also spent significant and increased sums of money to make physical alterations at the locations and also adopted safety protocols to make the property safe, including the installation of 120 new touchless faucets, 18 UV light air cleaning systems, 885 acrylic barriers and nearly 17,000 new HVAC air filters, according to the complaint.

The city was long concerned about the possibility of a major event that could negatively affect its business revenue at the locations at issue, so it bought a policy with limits of $1 billion to cover potential losses, the suits states.

"In making that purchase, (the city) wanted to ensure the maximum breadth of coverage possible and purchased a comprehensive ... policy that provided coverage for all risks of direct physical loss or damage," the suit states.

Instead, AHAC "abandoned its insureds at the time of most need," the suit states. In August 2021, AHAC denied "any and all liability," alleging in part that the city had not shown any "direct physical loss or damage," the suit states.

As an insurance company conducting business in California, AHAC is obligated to honor the express terms of the policy, the suit states.

"It did not do so here," according to the suit.

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