Two theater chains sued an insurance company and a broker Tuesday, seeking compensation for losses incurred after being forced to temporarily close because of the coronavirus.
Starlight Cinemas Inc. and Akarakian Theaters Inc. brought the complaint in Santa Monica Superior Court against Massachusetts Bay Insurance Co. and Maroevich, O’Shea & Coughlan Insurance Services Inc., alleging breach of the duty to pay a covered insurance claim and breach of the duty of good faith and fair dealing by Massachusetts Bay and negligence by Maroevich, O’Shea.
The suit seeks unspecified damages.
Representatives for the defendants could not be immediately reached for comment.
According to the suit, business interruption coverage is an optional insurance benefit available to companies to minimize their risk and sustain them when a suspension of operations causes a loss of income. The plaintiffs own and operate movie theaters across Southern California and bought an “all risk” commercial property and general liability insurance policy issued by Massachusetts Bay, the suit states.
On March 16, in response to the COVID-19 pandemic, Los Angeles County issued a health order prohibiting all indoor public and private gatherings and specifically ordering the closure of all theaters, the suit states.
Over the next few days, the counties of Orange and Riverside issued similar orders closing all non-essential businesses, including theaters, and on March 19, Gov. Gavin Newsom also issued a statewide stay-at-home order similarly banning all public and private gatherings, the suit states.
“As a result of the government orders, plaintiffs were required to close their theaters and cease business operations, resulting in a loss of functional use of their premises and an interruption of their business,” the suit states.
The plaintiffs submitted a claim for their income loss to Massachusetts Bay, the suit states. The theater chains’ owners had the right to rely on the company to handle their insurance claim according to California insurance standards, they say.
“Unfortunately for plaintiffs, MBIC failed to meet these claims-handling standards,” the suit states. “MBIC abruptly, unreasonably and with disregard for the interests of its insureds, denied the claim in its entirety.”
In the event a court disagrees with the theater chain owners and Massachusetts Bay’s interpretation of the policy is upheld, the plaintiffs will pursue their claim against Maroevich, O’Shea & Coughlin “for its negligent procurement of the policy,” the suit states.