A federal district court has refused to dismiss COVID-19-related business interruption coverage litigation filed by a shopping mall owner against an American International Group Inc. unit, concluding that its policy’s pollution and contamination exclusion is ambiguous.
C.J. Segerstrom & Sons, which owns and operates South Coast Plaza, a Costa Mesa, California, mall, filed the suit against AIG unit Lexington Insurance Co. and Starr Surplus Lines Insurance Co., according to Tuesday’s ruling by the U.S. District Court in Los Angles in C.J. Segerstrom and Sons v. Lexington Insurance Co. et al.
Segerstrom’s policies provided up to $5 million in coverage under a “Special Time Element-Cancellation Coverage” provision for losses related to “interference with the business of any insured location” as the result of an occurrence, the definition of which included “contagious or infectious disease.”
The Lexington policy also included a pollution and contamination exclusion, which Lexington argued precluded coverage, while Segerstrom contended it was inapplicable to its claim.
Both interpretations of the policy are reasonable, “thereby rendering the provision ambiguous and requiring that it be construed in favor of Segerstrom and against Lexington,” the court said in refusing to dismiss Segerstrom’s breach of contract, bad faith and declaratory judgment claims.
Attorneys in the case did not respond to requests for comment.