On May 11, 2020, Cohen Milstein and Gibbs Law Group filed a consumer class cation in the United States District Court for the Northern District of California on behalf of Mudpie, Inc., against Travelers Casualty Insurance Company of America for denying business interruption insurance claims due to government mandated business closures due to COVID-19.

Case Background

Since March 19, 2020, California’s “Stay at Home” order has instructed all 40 million California residents to remain at home, with certain exceptions. Though lifesaving, this mandate, which remains in place, ends in-house service at California retailers. This is not merely causing severe financial distress for retailers and their employees; such closures threaten the viability of California’s retail industry.

Plaintiff’s store Mudpie in San Francisco, California is among the thousands of retailers that have been forced by State orders to cease operations as part of the Stay at Home order. Mudpie and many California retailers—none of whom bear fault for statewide closures—were responsible business stewards, thus paying for business interruption insurance to protect against a situation like this.

Facing serious financial harm, Mudpie filed a claim with Travelers for business interruption coverage.

Plaintiff alleges that Travelers swiftly denied their claim. Though its reasons are cursory, the denial appears to be based on an unreasonable reading of its policy, which tracks form policies issued throughout California on a take-it-or-leave-it basis.

Mudpie and other retailers bought full-spectrum, comprehensive insurance for their businesses – not just for damage to their physical premises and equipment.  And for good reason. Business interruptions are a particular concern of this industry. Insurance coverage is important, if not vital, because profit margins in this industry are slim and reserve funds tend to be low.

Mudpie and other California retailers reasonably believed they had comprehensive coverage that would apply to business interruptions under circumstances like these, where they have done everything right to protect their businesses and the public.  But insurance companies like Travelers are cutting those lifelines – despite having pocketed significant premiums for such relief.  

Plaintiff brings this action, on behalf of itself and other California retailers, seeking declaratory relief, insurance coverage owed under Travelers’ policy, and damages.