Insurer Sues Gartner Over Canceled Event Claims: Covid Litigation

Business owners aren’t the only ones going to court over Covid-19 related insurance claims. Insurance companies are seeking to limit their exposure and obtain favorable rulings on business interruption, event cancellation and other claims.

U.S. Specialty Insurance Co., for instance, filed two cases on May 27 against Gartner Inc., a publicly traded research and advisory firm. The insurer alleges that Gartner is attempting to amend part of its policy covering more than 50 canceled and postponed live events to recoup more than allowed under current contracts.

The case is one variation of so-called business interruption insurance lawsuits, hundreds of which have appeared in state and federal courts since the coronavirus led to mandatory business closures and stay-at-home orders in March.

Lawsuits against policyholders might reflect insurers trying to get the upper hand on Covid-related coverage disputes, said David Halbreich, chair of Reed Smith LLP’s insurance recovery practice.

“Sometimes there’s a race to the courts to lock in a position that’s more favorable,” he told Bloomberg Law.

Insurers taking coverage scraps to court, even outside of the pandemic, isn’t uncommon, although the scale of claims resulting from the coronavirus fallout is likely to add pressure on insurers facing massive potential payouts.

However, Halbreich said insurance carriers may not be any more inclined to pursue litigation in the current environment than they have in the past.

Over the Limit?

U.S. Specialty Insurance Co (USSIC) is asking a Texas federal court to hold that Gartner can’t receive payouts totaling more than the contracts’ indemnity limits, can’t increase those limits to account for pandemic-related losses, and can’t obtain coverage for new events not previously named in the policy.

Gartner holds numerous events and conferences around the globe, and regularly buys insurance specifically to cover the events should they be disrupted. According to its annual report filed in February with the Securities and Exchange Commission, Gartner’s conferences attract more than 85,000 professionals each year and accounted for $476.9 million in 2019 revenue.

According to USSIC’s complaints, the value of Gartner’s events under its policy covering June 2019 through June 2020 exceeded $58 million, and events under a policy for all of 2020 totaled more than $400 million. The insurer’s two lawsuits against Gartner cover two separate event cancellation policies.

USSIC alleges that it has “preliminarily” accepted claims —subject to a full coverage review— on the 2020 policy for events through August totaling as much as $164.7 million in potential proceeds. The policy’s indemnity limit is $150 million, the insurer said. For the second policy, USSIC said it’s reviewing claims that could exceed $20 million, or the reported indemnity limit.

The insurance company, in its complaints, suggests Gartner had its broker submit requests to reinstate indemnity limits so it could use those limits for claims on unrelated shows, pushing coverage beyond current limits.

“No provision of the policy entitles Gartner to increase the Aggregate Limit of Indemnity,” USSIC’s complaint said. Although the policy permits Gartner to secure additional coverage within indemnity limits in some cases, “the policy does not permit Gartner to secure additional coverage where, prior to inception of that coverage, Gartner was aware of circumstances—such as the COVID-19 pandemic—that may lead to a claim.”

The cases are U.S. Specialty Insurance Co. v. Gartner Group Inc., S.D. Tex., No. 4:20-cv-01850, complaint filed 5/27/20 and U.S. Specialty Insurance Co. v. Gartner Group Inc, S.D. Tex., No. 4:20-cv-01851, complaint filed 5/27/20.

Eggs & Casinos

Below is a handful of other cases highlighting this week’s influx of business interruption and related litigation:

• Las Vegas casino Treasure Island sued Affiliated FM Insurance Co. on May 28, accusing the insurer of refusing to honor an “all risks” policy for losses at covered locations. It said an emergency order from Nevada Gov. Steve Sisolak halting all gaming activities in the state triggered several provisions of its insurance policy. The casino is seeking a declaratory judgment from a Nevada federal court that its policy covers its business interruption claims, as well as damages resulting from alleged contract breaches and violations of the Nevada Unfair Claims Practices Act. (The case is Treasure Island LLC v. Affiliated FM Insurance Co., D. Nev., No. 2:20-cv-00965, complaint filed 5/28/20.)
• USSIC is asking a Nevada federal court to toss a business interruption lawsuit filed by the Egg Works family-owned restaurant group in Las Vegas. The insurer, in its motion to dismiss submitted May 26, said the restaurants haven’t shown that any of the claimed losses were caused by “insured events” laid out in their policy. Because of this, they fail to state a breach of contract or fair dealing claim, the motion continued. The restaurant group filed its proposed class action on April 24, and is demanding a jury trial. (The case is Egg and I LLC et al v. U.S. Specialty Insurance Co., D. Nev., No. 2:20-cv-00747, motion to dismiss filed 5/26/20.)
• A Texas restaurant operator had its lawsuit against Cincinnati Insurance Co. moved to a federal court this week. The insurer pushed the case to the U.S. District Court for the Northern District of Texas from Texas District Court for Dallas County. Vandelay Hospitality Group filed the complaint on April 23, accusing its insurer of refusing to cover coronavirus-related losses. It’s seeking to recoup more than $1 million. (The case is Vandelay Hospitality Group v. The Cincinnati Insurance Co., N.D. Tex., No. 3:20-cv-01348, case moved 5/26/20.)