Shuttered by COVID-19, Restaurants, Businesses Fighting Back Against Insurance Company Claim Denials

April 29, 2020 GMT

DALLAS and HOUSTON, April 29, 2020 /PRNewswire/ -- Businesses across a range of sectors are starting to fight back against insurance companies, charging that insurers are operating in bad faith by rejecting claims for damages caused by the COVID-19 pandemic and shelter-in-place orders that have shut down their businesses, according to two new federal bad-faith insurance lawsuits filed by the Fears Nachawati Law Firm.

According to lawsuits filed on behalf of Dallas-based Salum restaurant and Houston-based Frosch International Travel, Travelers Indemnity Company rejected their damages and business-interruption claims without investigating.

In defending its denial to Salum’s claim, Travelers wrongly stated that language in the restaurant’s policy specifically excludes losses caused by “bacteria and viruses,” according to the lawsuit. However, Salum’s “Deluxe Coverage” policy contains no such language. Travelers also claims that the restaurant has not suffered because restaurants are allowed to sell food to-go, even though it has never offered takeout service.


Based in Houston, Frosch has offices in 40 cities and employs more than 2,200 people. The company’s policy states that it would “pay for [T]he actual loss of Business Income … sustain[ed] due to the necessary ‘suspension’ of your ‘operations.’” The policy also promises to pay for additional coverages, including damages that occur when a business is closed by civil authorities, as happened across the United States during the pandemic. In its denial, Travelers claimed that Frosch had not suffered a “cessation of business” because it was still open and had not sustained property damage.

“This is the definition of bad faith,” said Fears Nachawati trial lawyer Matthew McCarley. “Insurance companies like Travelers have systematically taken advantage of loyal policy holders, promising coverage but backing out when businesses need them the most.”

Mr. McCarley says these two businesses are not unique. Across the country, businesses affected by the pandemic are finding that business interruption claims are being denied as the insurance industry’s powerful lobby pressures lawmakers to change the rules after-the-fact and exempt the industry from pandemic-related liability.

The lawsuits seek declaratory judgments that Travelers must honor the policies and cover the damages claims. They also seek damages for breach of contract, violation of the Texas Insurance Code, and breach of Travelers’ duty of good faith and fair dealing. Insurance statutes provide for up to triple the amount of punitive awards for insurance companies found to have operated in bad faith.


The cases are Salum Restaurant LTD v The Travelers Indemnity Company, case No. 3:20-cv-01034 in the U.S. District Court for the Northern District of Texas; and Frosch Holdco et al. v The Travelers Indemnity Company, et al., case No. 4:20-cv-0148 in the U.S. District Court for the Southern District of Texas.

Founded in 2006, Fears Nachawati Law Firm represents individuals, businesses and public entities in cases involving business interruption insurance disputes, medical device and pharmaceutical liability, environmental damage claims, and serious personal injury and wrongful death. For more information on the firm, visit

Robert Tharp

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SOURCE Fears Nachawati Law Firm