QBE faces another Covid claim test

QBE named in suit by bankrupt US retailer which says COVID’s impact should be covered by business interruption insurance.

Ivanka Trump brand boots for sale at a Century 21 department store in New York. Picture: AFP

Listed insurance company QBE has been named in yet another landmark business interruption insurance case concerning coronavirus, this time in the United States.

American discount retailer Century 21 last month entered chapter 11 bankruptcy after 60 years of continuous trading due to the impacts of COVID-19 on the US economy.

Co-CEO Raymond Gindi said the decision followed the refusal of the company’s various insurers, including QBE’s American arm QBE Specialty Insurance, to pay US$175m ($244m) due under Century 21’s business interruption insurance policies.

“While insurance money helped us to rebuild after suffering the devastating impact of 9/11, we now have no viable alternative but to begin the closure of our beloved family business,” he said.

“Our insurers, to whom we have paid significant premiums every year for protection against unforeseen circumstances like we are experiencing today, have turned their backs on us at this most critical time.”

In documents filed in the Southern District of New York Court, Century 21 said that the company had paid on average $US1.4m ($1.95m) a year to the various insurers in premiums since 2007 and was entitled to have their losses as a result of COVID-19 store closures covered under their business insurance.

The case is reminiscent of a test case in the UK, in which QBE was also named, where it was determined that insurers are liable for COVID-19-related claims made against business interruption insurance.

A test case is also underway in NSW, but is unlikely to be as clear cut as business interruption policies in Australia often exclude pandemic diseases from coverage. In this case, the question revolves around the exact classification of COVID-19 within uncertain legislative boundaries.

Century 21’s $US175m suit has been rebutted by QBE and the other defending insurers, who say their business interruption policies do not cover the economic impacts of COVID-19.

In particular, QBE sought to classify COVID-19 under the “microorganism exclusion endorsement” clause.

“This policy does not insure any loss, damage, claim, cost, expense or other sum directly or indirectly arising out of or relating to: mould, mildew, fungus, spores or other microorganism of any type, nature, or description, including but not limited to any substance whose presence poses an actual or potential threat to human health,” QBE said in its response.

The company also classified COVID-19 as a “contaminant or pollutant” under a clause excluding liability for damage of that nature and as a “biological hazard,” meaning a “material, product or substance, whether engineered or naturally occurring, that induces or is capable of inducing physical distress, illness, or disease.”

QBE also said that any claim made against a loss arising from the shutdown orders made by various US state and federal governments were also not actionable, as there was no property damage or loss of access to the property as a result of the orders, and that Century 21 failed to make a claim of this nature within the 60-day limitation period.

Other defendants to the suit include Allianz Global, Liberty Mutual Fire Insurance and Landmark American Insurance.

QBE declined to comment.