PORTLAND, Ore. (KOIN) — The popular Portland-based brewpub, Kells Irish Brewery, has filed a $2 million federal lawsuit against the Continental Western Insurance Company for allegedly refusing to pay for business losses caused by COVID-19 shutdowns.
According to the complaint filed April 20, Kells Inc. and Kells Brewpub LLC are jointly suing Continental Western for $2,050,000, after accusing the insurance company of denying coverage and willfully declining to pay benefits for COVID-related financial losses – which they claim should have been covered by their policy.
Federal court documents suggest Kells paid “high premiums” for a commercial property insurance policy with Continental, with the promise that the company would cover any unexpected losses at their Portland establishments from May 15, 2019, until May 15, 2020.
By March of 2020, after the COVID-19 outbreak reached Oregon and Governor Brown issued an executive order prohibiting restaurants from offering indoor dining or beverage services, Kells closed its doors and suspended operations to bring its businesses in accordance with the public orders and limit health risks.
“Thereafter Kells began to incur substantial business income and other losses as a result of its suspension of operations,” the complaint states. “The presence of the dangerous and potentially fatal Covid-19 virus in and on property, including in indoor air, on surfaces, and on objects, renders the property lost, unsafe and unfit for its normal usage.”
According to the complaint, the presence of COVID-19 rendered the Kells property incapable of being used for its intended purpose and caused the company, which was famous for its large sporting and St. Patrick’s Day events, significant financial loss.
The lawsuit claimed the “suspension of operations could not have come at a worse time,” as Kells had just purchased additional food and drinks, hired more staff, and paid entertainers to perform at the upcoming three-day St. Patrick’s weekend celebration, prior to the shutdown.
“Because of the timing of the suspension of operations Plaintiffs had to pay for all of these expenses, despite not being able to realize revenue from their business operations during this critical period,” the suit stated. “Revenue from St. Patrick’s Day events has always played an enormous part in sustaining Plaintiffs’ businesses throughout the year. The loss of most of that revenue in 2020 due to the suspension of operations was catastrophic.”
Court documents reveal it was around this time in mid-March when Kells filed a claim with Continental for the business income losses, however, the lawsuit alleges the Iowa-based insurance company denied the claim without an investigation or any further analysis of the potential for coverage under their policy, in accordance with Oregon law.
Kells accused Continental of being intentionally vague in its definition of the phrase “direct physical loss of or damage to property,” stating the company would later project their own interpretation of the term in a way which favored and benefited only the insurance company.
While the lawsuit acknowledged the “widespread usage of a virus exclusion” within the insurance industry, in order to remove the burden of accountability regarding disease-related losses from insurance companies, it alleged the policy between Kells and Continental did not include a virus exclusion or any other similar clause.
Because Continental intentionally chose not to include a virus-exclusion within the policy – which would exempt the company from having to pay for any virus-resulting loss or damage, the federal lawsuit claims the insurance company is obligated to cover the pandemic-driven financial losses.
The claim states Kells was “forced to lay off or furlough employees, cancel orders from suppliers, incur expenses to mitigate loss, and take other actions with a significant impact on their businesses, business partners and their community, as a result of the suspension of their operations and Defendant’s failure to pay losses covered under the Policy.”
According to the suit, Kells has alleged the combined amount of business, income, and other losses covered by the policy during the time the brewery was shut down for COVID totaled $2 million.
The lawsuit also revealed Kells is seeking an additional amount of $50,000 from Continental, after accusing the company of breaching the “covenant of good faith and fair dealing,” obligated by their policy, and further claimed Continental’s refusal to pay was without cause and unreasonable.
“On information and belief, Defendant has a custom and practice of denying all of its insureds’ claims based upon the same unreasonable and self-favoring interpretation of its property insurance policies,” The claim stated. “and specifically adopting an interpretation of the phrase “direct physical loss or damage” as not applying to the presence or suspected presence of the Covid-19 virus, the incidence of COVID-19, or governmental closure orders.”
The complaint continued, “In taking the actions alleged above, Defendant showed a reckless and outrageous indifference to a highly unreasonable risk of harm to its insured, and Defendant acted with a conscious indifference to the interests and welfare of its insured.”
The case was moved from the Multnomah County Circuit Court to the federal court system and was assigned to Judge Michael W. Mosman on April 20, 2022.
KOIN 6 News reached out to both Kells and Continental for a comment on the pending litigation but did not receive an immediate response.