Century 21 Stores is selling a stake in its legal battle against insurers for alleged unpaid BI claims.
According to a Bloomberg report, the New York department store company, which filed for bankruptcy in September, claims that it is owed more than $175m from BI policies due to COVID-19 having a disastrous effect on its operations, according to court papers. The lawsuit is targeting Allianz SE, Great American Fidelity Insurance and Liberty Mutual Insurance Representatives for the companies either declined to comment or did not respond to messages.
The claim is the most valuable possession that the chain has left, and proceeds from selling it would help repay creditors after Century 21 closes for good.
Thousands of businesses across the US — including more than a dozen professional baseball teams and an iconic Hollywood restaurant — began similar legal battles against insurers after the spread of the virus. However, insurance companies have mostly come out on top, arguing that diseases cannot cause the physical damage needed to trigger a payout, or pointing to clauses that exclude viruses, said the report.
Century 21’s legal claim has found a buyer, although the buyer’s identity is not yet known — lawyers for the chain have asked the bankruptcy judge to keep the identity a secret. The exact sale price was not disclosed either, but the proceeds would be at least enough to pay off Century 21’s secured debt, which totalled more than $50m at the time of the bankruptcy filing. A hearing is scheduled for Tuesday in New York.
Century 21 said in court papers that the company had planned its insurance coverage carefully, paying more than $1.4m a year in premiums to about a dozen insurers for protection such as property damage, business interruption “and other situations in which access to the vicinity of the debtors’ stores is restricted”.
One insurer has paid the company’s pandemic claim. The rest refused, and Century 21 is putting the blame on them for its September bankruptcy filing. The store seeking payment of more than $175m covering March through 31 May, and it might ask for more to cover later months as well as consequential damages.