The real estate investment trust, which operates more than 50 upscale hotels across the country, said that insurers including Certain Underwriters at Lloyd's, Scottsdale Insurance Co. and HDI Global Insurance Co. had refused to make good on coverage obligations despite the more than $12.2 million it had spent in insurance premiums.
"[The insurers] still refuse to recognize coverage under the policies sold to Pebblebrook, contravening their contractual duties as bargained for between the parties and depriving Pebblebrook of the coverage it reasonably expected," the company argued.
According to the complaint, the insurers covered Pebblebrook's properties under a tower of policies all governed by common terms as laid out in a single master policy.
Pebblebrook said that it submitted a notice of loss to its insurers in April 2020, but that it was informed in December that its claim was being denied under a string of policy provisions that a claims servicer said barred coverage.
Among the reasons cited for the denial was language requiring "physical loss, damage or destruction" of Pebblebrook property in order to qualify as a covered interruption of business.
The case is part of a tidal wave of litigation from businesses seeking to recoup lost income and other financial losses suffered after being forced to close their doors beginning last March and April as the pandemic first swept across the United States.
While judges have thrown out similar lawsuits brought against insurers based on arguments that the policyholders did not suffer any physical damage to their businesses, Pebblebrook said that language regarding the "physical loss or damage" requirement was "susceptible to more than one reasonable interpretation [and] should be interpreted against the drafter."
"Nothing in the master policy specifies or suggests structural damage or structural alteration to a Pebblebrook location is a prerequisite or condition to coverage," the company said.
As an alternative, the company argued that the pandemic had created direct physical loss of or damage to its properties by limiting their ability to be operated safely.
"The actual presence and the prospective presence of COVID-19 cause direct physical loss of and damage to property by … transforming or rendering the property unsafe to human health, thereby depriving Pebblebrook of the usage, functionality and reliability of its property," the company said.
The company said in its complaint that there had been approximately 200 confirmed COVID-19 diagnoses among staff and guests at Pebblebrook properties, and that the presence of the virus had caused a demonstrable loss.
"Pebblebrook locations shut down or partially limited operations," the company said. "The operations remained closed or limited until it was clear that it was safe to reopen for workers, invitees, and guests, consistent with adherence to strict and rigorous protocols and health and safety guidelines in place to prevent the spread of COVID-19 on insured property and to reduce the likelihood of individuals' exposure to COVID-19 and affected property."
The company did not specify in its complaint the amount in coverage it was hoping to win as a result of the litigation.
A representative for Pebblebrook did not immediately return a message seeking comment.
Representatives for the insurers, meanwhile, either declined to comment or else did not return messages from a reporter.
Pebblebrook is represented by Sheryl Axelrod and Lisa Savitt of the Axelrod Firm PC.
Counsel information for the insurers was not immediately available.
The case is Pebblebrook Hotel Trust v. Allied World Assurance Co. Inc. et al., case number 210500035, before the Court of Common Pleas of Philadelphia County, Pennsylvania.
--Editing by Alanna Weissman.
For a reprint of this article, please contact reprints@law360.com.