A federal district court has refused to dismiss a COVID-19-related business interruption lawsuit filed by a shopping center owner against a unit of American International Group Inc., concluding that its policy’s pollution and contamination exclusion is ambiguous.
CJ Segerstrom & Sons, which owns and operates South Coast Plaza, a shopping center in Costa Mesa, Calif., filed 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 i CJ 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 operations of any insured location” as a result of an event, whose definition included “contagious or infectious disease”.
The Lexington policy also included a pollution and contamination exclusion, which Lexington argued excluded coverage, while Segerstrom argued it did not apply to its claim.
Both interpretations of the policy are reasonable, “making the provision ambiguous and requiring it to be interpreted in favor of Segerstrom and against Lexington,” the court said in refusing to dismiss Segerstrom’s breach of contract, bad faith and declaratory judgments.
Attorneys in the case did not respond to requests for comment.