A medical clinic located in New Orleans, Spine Care East, LLC, filed suit in a federal district court in Louisiana on August 24, against its insurer, Hanover Insurance Company. In the Complaint (click here to review the Complaint), Spine Care alleges that Hanover acted in bad faith by failing to properly compensate Spine Care for its business interruption losses sustained in the wake of Hurricane Katrina.
The Hanover commercial policy provided coverage for Spine Care’s losses due to business interruption. Spine Care alleges that its New Orleans clinic was damaged by Katrina-related winds that caused the business to remain closed after the storm.
The Hanover policy provides coverage for windstorm damage, and accordingly, Hanover paid Spine Care approximately $13,000 under its business interruption coverage, a sum that Spine Care claims is far less than the actual business loss sustained. Spine Care sets forth multiple arguments in the Complaint, First, Spine Care alleges that Hanover breached its good-faith duties to properly adjust its claims, including the failure to properly train its adjusters. Additionally, Spine Care argues that the policy’s anti-concurrent causation clause, which provides that if a loss arises from a combination of covered and non-covered perils, the loss is not covered, is both ambiguous and unenforceable.
We will continue to monitor this litigation and other Katrina-related developments and provide updates at InsureReinsure.com.
