Insurer Seeks Declaration that Insured not Entitled to Coverage for COVID-19-Related Losses in Excess of Aggregate Limits

by: Gina Foran

This week, U.S. Specialty Insurance Company (“USSIC”) filed a declaratory relief action in the U.S. District Court for the Southern District of Texas seeking a judicial declaration that  its insured, Gartner Group, Inc. (“Gartner”), is not entitled to coverage in excess of the Event Cancellation Insurance policy’s aggregate limit of $150 million for COVID-19-related losses.

USSIC issued an event cancellation policy to Gartner, a global research and advisory company that holds several events and conferences each year. Due to the COVID-19 pandemic, Gartner cancelled or postponed a majority of its events scheduled for 2020. In the complaint, USSIC states that it accepted Gartner’s submitted claims and that these claims will potentially exhaust the policy’s aggregate limit of indemnity of $150 million.

Gartner allegedly takes the position that it has a right to coverage in excess of the aggregate limit of $150 million based on a reinstatement of limits provision of the policy that allows the insured to request reinstatement of “that part of the Limit of Indemnity shown in the Schedule utilized by way of any potential or actual loss payment under this insurance.” USSIC states that  the reinstatement of limits provision has no impact on the aggregate limit of indemnity, which it states is capped at $150 million. Instead, USSIC states, the reinstatement of limits provision only authorizes Gartner to reinstate that part of the original limit of indemnity of an event/conference listed in the schedule of events that is eroded by payment of actual or potential loss.

USSIC additionally states that Gartner is not entitled to an increase of indemnity limits for COVID-19-related losses under the fortuity doctrine and known loss rule, as well as a prior known loss exclusion in the policy, all of which deal with whether insurance is available to an insured for known losses. USSIC states that because coverage under the requested reinstatement has not incepted, it should not be available because Gartner is aware of the COVID-19 pandemic.