Las Vegas Restaurants Denied COVID-19 Relief, Court Rules

When a set of Las Vegas restaurants seek insurance coverage for lost income due to COVID, the court must decide it the policy fits.
By: | May 7, 2021

Egg Works, a group of family-oriented restaurants operating in Las Vegas, sought COVID-19-related loss relief after the Nevada state governor, Steve Sisolack, shut down onsite and indoor dining at the start of the pandemic.

Egg Works, which employs more than 400 people in the region, had to shutter its many storefront doors between March 20, 2020 and April 30, 2020.

The franchise alleged it faced significant financial losses following the shutdown. It turned to its insurer, U.S. Specialty Insurance Company, for aid.

A restaurant recovery insurance policy was issued by U.S. Specialty in September 2019 and was in effect until September 2020. Egg Works notified U.S. Specialty of its financial losses and request for payment “consistent with the terms of their policy.”

Two days later, Egg Works followed its request with an instant action, alleging U.S. Specialty “refuse[d] to or have failed to meaningfully respond to [Egg Works’] request.”

It further alleged that the insurer was refusing to pay and instead brought forth claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and declaratory relief.

The insurance policy, U.S. Specialty pointed out in its motion to dismiss the alleged claims, stated that under its “Insured Events” section, the insurer “will reimburse the insured for its loss in excess of the deductible … caused by or resulting from any of the following Insured Events.”

It listed accidental contamination, malicious tampering, product extortion and adverse publicity.

The policy did not mention shutdown by government ordinance or action, the insurer said.

Scorecard: The court granted U.S. Specialty Insurance Company’s motion to dismiss. No funds will be paid under the restaurant recovery insurance policy.

Takeaway: We’re only a year out from the start of the pandemic. As more businesses seek coverages for lost revenue, insurers must keep a pulse on the court system to see how these lawsuits are panning out. &

Autumn Demberger is the content strategist at Risk & Insurance®. She can be reached at [email protected]

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