Ralph Lauren Corp. sues insurer over Covid-19 losses

Last week, Ralph Lauren Corp. sued its insurer, Factory Mutual Insurance Co. (“FMIC”), for breach of contract, declaratory judgment, and violation of the New Jersey Consumer Fraud Act as a result of an alleged “fraudulent scheme” to limit payouts for losses resulting from the coronavirus pandemic.  The complaint, filed in U.S. District Court for the District of New Jersey, alleges that FMIC has refused to honor its contractual obligations under the policy, which provides for a maximum payout of $700 million.

The fashion retailer temporarily closed brick-and-mortar locations after states implemented stay-at-home orders and other restrictions in an effort to prevent the spread of the virus.  Despite efforts to prioritize online sales in the midst of store closures due to COVID-19, Ralph Lauren Corp.’s revenues fell a staggering 66% for the first quarter as compared to the prior year.  In North America alone, brick-and-mortar store sales fell 77% while wholesale sales plummeted 93% from the prior year.

The complaint alleges that FMIC touted its “Market Leading Claims Service” as a key reason why Ralph Lauren Corp. should procure coverage from FMIC, claiming to “[f]ocus on finding coverage instead of exclusions” and “[f]air and prompt payment of losses.”   It further alleges that Covid-19 and related government action triggered multiple provisions of its “all risks” policy, including coverage for communicable disease response and “time element” losses.  “Despite agreeing to cover Ralph Lauren Corp. for all risks of physical loss or damage to property resulting from any cause not excluded, as well as the resulting time element and extra expense losses, FMIC has refused to honor its contractual obligations in the face of a claim for which coverage is expressly provided.” 

The case is Ralph Lauren Corp. v. Factory Mutual Ins. Co. , D.N.J., No. 2:20-cv-10167.  The complaint can be found here.