Hotels battle insurers for Covid coverage

Three establishments seek compensation for pandemic closures, plus damages

The Life Hotel, The Belvedere and The Pearl Hotel (Google Maps, iStock)
The Life Hotel, The Belvedere and The Pearl Hotel (Google Maps, iStock)

It may be two years into the pandemic, but loss-of-business lawsuits keep rolling in.

Three New York City hotels have sued their insurers over Covid-19, seeking benefits they claim are owed under their policies.

The Life Hotel at 19 West 31st Street; the Pearl, at 233 West 49th Street in the heart of the Theater District; and the Belvedere, at 319 West 48th Street, are plaintiffs in three separate cases.

The Life Hotel — in a former LIFE Magazine office building — and the Belvedere are both suing Greater New York Mutual Insurance Company. The Pearl is suing Strathmore Insurance Company, whose parent company is the same firm, Greater New York.

All three hotels had “all risk” insurance policies, which their complaints state included pandemic coverage.

The establishments are hoping for better results than restaurants and other retailers have had in bringing pandemic-related cases against their insurers. But many policies in those cases did not involve business-interruption coverage.

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The hotels’ policy covers “direct physical loss of” property, “damage” to property, and perhaps most importantly, “the actual loss of business income you sustain due to the necessary ‘suspension’ of your ‘operations’ during the ‘period of restoration.’” The hotel operators claim all three of these losses occurred during the pandemic.

The Covid-19 pandemic led to closures and capacity restrictions imposed by city and state governments. With tourism and business travel near zero, many hotels either closed or operated at a loss for much of 2020 and last year. The lawsuit alleges that the restrictions caused the hotels to lose millions of dollars.

Revenue per available room declined by 50 percent in 2020, according to a report by Morningstar, and that figure does not count the thousands of rooms that were closed. As hotels sat empty, delinquencies on their loans spiked during the spring and summer of 2020. They peaked at 23.9 percent that June, up from less than 1.5 percent in early 2020.

Delinquencies have since fallen below 8 percent thanks to declining Covid cases, the lifting of pandemic restrictions, and pent-up demand being unleashed.

In their lawsuits, the plaintiffs are seeking not only policy benefits but punitive damages for Greater New York’s alleged interference and attorney fees.

The insurer and lawyers for the hotels did not respond to requests for comment.