Wataga Properties sues Lloyds for $180m

Canada: Calgary-based vacation rental property management firm Wataga Properties has brought a class-action lawsuit worth $180 million against Lloyds Underwriters over claims that the insurance brand wrongfully denied business interruption claims related to the global pandemic.

As the representative plaintiff, Wataga Properties’ complaint centred around business losses that were supposedly covered under a business interruption clause due to the global lockdown, border control and travel restrictions.

In July, however, Lloyds claimed that the policy did not apply in this instance. It said the claim “must arise out of an order of civil authority which prohibits access to the insured property due to direct physical loss or damage”.

Wataga responded, saying that the “all risks” coverage that they acquired has no exclusions for Covid-19 related disturbances. It further alleges that the virus’ ability to spread in physical ways constitutes a form of physical damage.

Matthew Farrel, a lawyer with Guardian Law Group, told Insurance Business Magazine: “Just because you can’t see it doesn’t make it less real or less physical. They should be able to rely on this insurance when a disaster strikes.”

Courts are still deciding worldwide whether or not small businesses can claim interruption insurance due to the pandemic. Yesterday, a UK High Court test case decided in favour of policyholders in “a majority of cases”, focusing on particular wordings within these insurance policies.

The court ruled that payouts were triggered by particular non-damage clauses specifying disease and a denial of access to business premises. It added that payouts for these wordings should put businesses in their pre-Covid position but noted that each company’s individual wordings had different conditions.

Paul Lewis, a partner at Herbert Smith Freehills, said: “This is a really significant judgment. It brings guidance to how business interruption insurance wordings should operate in the context of the Covid-19 pandemic, which has had such a devastating effect on businesses across the country.

“The decision should bring welcome news to a significant number of policyholders,” he added.

The news has led Hospitality Insurance Group Action, who represents many policyholders in the industry, to pursue additional action against insurance companies. The decision could help over 370,000 small businesses in the UK, including holiday homes, gain coverage.