Lloyd's Refuses To Pay Over $1M Pandemic Limit To Eateries

By Daphne Zhang
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Law360 (September 30, 2020, 11:03 PM EDT) -- Underwriters at Lloyd's of London urged a Georgia state court to declare that a Texas restaurant chain's COVID-19-related losses are only covered by a $1 million pandemic endorsement instead of the $50 million policy, and the insurer has already fulfilled its duty in paying that amount.

Lloyd's on Tuesday said Pappas Restaurants Inc. is wrongfully asking for the policy's full aggregated limit of $50 million after receiving the $1 million pandemic sublimit Lloyd's paid in August. The restaurant company has agreed and understood since 2016 that the coverage to the policy's "pandemic event endorsement" is limited to $1 million per period of insurance, the carrier said.

The insurer is asking the court to hold that the maximum amount of coverage available to Pappas is the sum it paid under the policy's pandemic endorsement. Lloyd's said the $1 million amount is reflected by the fact that Pappas paid an additional 4.49% of the policy's total premium to purchase pandemic event coverage.

"Pappas has paid a modest amount of premium to include this same pandemic event endorsement with a $1 million per period of insurance limit of indemnity," Lloyd's said, adding that the chain is not entitled to the policy's full aggregate limit of $50 million, which does not cover pandemic loss.

Pappas' 100 restaurants across the country are insured under Lloyd's policy. The restaurant chain added a pandemic event endorsement to its policy in 2016. The endorsement covers business interruption losses caused by a pandemic with a limit of $250,000 per restaurant and up to the $1 million "per period of insurance."

In July, Pappas submitted a statement of loss of four of its restaurants, claiming each location suffered up to $250,000 of loss. In August, Lloyd's paid the company $1 million, the maximum limit provided under the pandemic endorsement, according to the suit.

However, according to Lloyd's, Pappas has subsequently claimed its total $25 million in losses from COVID-19 closures are all covered under the pandemic endorsement. The insurer is asking the court to declare it has no more obligations to pay for Pappas' losses and the pandemic endorsement limits its maximum liability to $1 million for each period of insurance.

Representatives of the parties could not be immediately reached for comment Wednesday.

Lloyd's is represented by Thomas S. Hay and Kevin F. Kieffer of Troutman Pepper Hamilton Sanders LLP.

Counsel information for Pappas was not available.

The case is Underwriters at Lloyd's London v. Pappas Restaurants Inc., case number 2020CV340943, in the Superior Court of Fulton County in the State of Georgia. 

--Editing by Janice Carter Brown.

For a reprint of this article, please contact reprints@law360.com.

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