Portland-based brewery sues insurance company for refusing to cover costs caused by COVID shutdown
PORTLAND, Ore. (KOIN) — Popular Portland-based Kells Irish Brewery has filed a $2 million federal lawsuit against Continental Western Insurance Company for allegedly refusing to pay for business losses caused by the shutdowns of COVID-19.
According to the lawsuit filed April 20, Kells Inc. and Kells Brewpub LLC are jointly suing Continental Western for $2,050,000, after accusing the insurance company of denying coverage and willfully withholding benefits for related financial losses. to COVID – which they believe should have been covered by their policy.
Federal court documents suggest Kells paid ‘high premiums’ for a commercial property insurance policy with Continental, with the promise that the company would cover any unforeseen losses at its Portland facilities from May 15, 2019 through May 15. 2020.
In March 2020, after the COVID-19 outbreak reached Oregon and Governor Brown issued an executive order prohibiting restaurants from offering indoor food or beverage service, Kells closed. and suspended operations to bring its businesses into compliance with public orders and limit health. risks.
“Subsequently, Kells began to incur substantial business income and other losses as a result of the suspension of its operations,” the complaint states. “The presence of the dangerous and potentially deadly Covid-19 virus in and on the property, including indoor air, surfaces and objects, renders the property lost, unsafe and unsuitable for normal use.”
According to the complaint, the presence of COVID-19 rendered the Kells property unable to be used for its intended purpose and caused the company, which was famous for its major sporting events and St. Patrick’s Day, significant financial loss.
The lawsuit claimed that the ‘suspension of operations could not have come at a worse time’ because Kells had just purchased additional food and drink, hired more staff and paid artists to perform. during the upcoming three-day St. Patrick’s Day weekend celebration, before shutting down.
“Due to the timing of the suspension of operations, the plaintiffs had to pay all of these expenses, although they were unable to earn any income from their business activities during this critical period,” the lawsuit states. “St. was catastrophic.”
Court documents reveal that it was around mid-March that Kells filed a claim with Continental for lost business income, however, the lawsuit alleges that the Iowa-based insurance company dismissed the claim without investigation or further analysis of the potential for coverage under their policy, in accordance with Oregon law.
Kells accused Continental of being intentionally vague in its definition of the term “direct physical loss or damage to property”, stating that the company would later project its own interpretation of the term in a way that favored and benefited only the insurance company.
While the lawsuit acknowledged the “widespread use of a virus exclusion” in the insurance industry, in order to remove the burden of liability for illness-related losses from insurance companies, it alleged that the police enter Kells and Continental did not include a virus disclaimer or similar clause.
Because Continental intentionally chose not to include a virus exclusion in the policy — which would exempt the company from having to pay for any loss or damage resulting from a virus, the federal lawsuit claims the company d insurance is obliged to cover the financial losses caused by the pandemic. .
The claim says Kells was “forced to lay off or furlough employees, cancel orders from suppliers, incur expenses to mitigate losses and take other actions that materially impact their businesses. , their business partners and their community, following the suspension of their operations and the failure of the defendant to pay the losses covered by the policy. »
According to the lawsuit, Kells alleged that the combined amount of business, income and other losses covered by the policy during the brewery’s COVID shutdown period was $2 million.
The lawsuit also revealed that Kells was seeking an additional $50,000 from Continental, after accusing the company of violating the “covenant of good faith and fair use,” mandated by their policy, and further claimed that Continental’s refusal to pay was without cause and unreasonable.
“Based on information and beliefs, it is the custom and practice of defendant to deny all claims of its insureds based on the same unreasonable and self-serving interpretation of its property insurance policies,” the court said. complaint. “and specifically adopting an interpretation of the phrase ‘direct physical loss or harm’ as not applying to the presence or suspected presence of the Covid-19 virus, the incidence of COVID-19, or prescriptions for government closures.
The complaint continued: “In taking the steps alleged above, the defendant showed reckless and outrageous indifference to a highly unreasonable risk of harm to its insured, and the defendant acted with conscious indifference to the interests and well-being of its insured.
The case was transferred from the Multnomah County Circuit Court to the federal court system and assigned to Judge Michael W. Mosman on April 20, 2022.
KOIN 6 News reached out to Kells and Continental for comment on the ongoing litigation, but did not receive an immediate response.