A federal judge has dismissed a lawsuit by a family-owned Lenexa business seeking to recover coronavirus-related financial losses from its insurance company.
U.S. District Judge Julie Robinson ruled that Sportsman Cap & Bag’s “all-risk” policy covering direct losses to its property only covers “material changes” or “intrusions” onto the property that render it unusable.
The ruling by Robinson, a federal judge in Kansas City, Kansas, runs counter to two recent decisions by a federal judge in Kansas City, Missouri, in similar cases against the defendant, The Cincinnati Insurance Co.
In August, U.S. District Judge Stephen Bough denied Cincinnati’s motions to dismiss a case brought by Studio 417, an operator of hair salons in Springfield, Missouri, and in a separate case brought by K.C. Hopps, a Kansas City restaurant group.
Bough found that both Studio 417 and K.C. Hopps had adequately stated claims of physical loss.
Bough’s rulings represented some of the first favorable outcomes for policyholders among more than 1,000 business interruption lawsuits that have been filed by businesses against their insurers throughout the country.
In other cases, judges have found in favor of the insurance companies, ruling like Robinson that coronavirus-related losses do not count as damage to property and therefore are not triggered by all-risk policies covering “direct loss.”
Insurers contend such policies were never intended to cover financial losses related to the COVID-19 pandemic. Being forced to pay out such claims, they say, could ruin the industry.
Patrick Stueve, who represents Sportsman Cap & Bag, said he is reviewing options following Robinson’s dismissal of the case, including a possible appeal.
Stueve also represents the hair salons and restaurants in the cases before Bough, which are now scheduled to go to trial in mid-2022.
Sportsman Cap & Bag alleged in its suit against Cincinnati that stay-at-home orders aimed at curbing the spread of the coronavirus had a “devastating effect” on its business. Before the pandemic struck, the company said it was on track to gross more than $100 million this year.
It said the stay-at-home orders issued by government authorities earlier this year prevented employees from showing up to work, causing a loss of nearly 95% of its sales.
Sportsman’s predecessor company, Pioneer Cap Company, was founded by Abe Yeddis, who sold it in 1970 and started Promotional Headwear Inc. a few years later. The company operates under the name Sportsman Cap & Bag and sells custom promotional hats, bags and other marketing merchandise.
