American Museum of Natural History sues insurer over Covid-19 coverage

New York institution says it lost over $37m when it was forced to shut down, but insurance company caps potential coverage at $200,000

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The American Museum of National History in New York D. Finnin/© AMNH

The American Museum of National History in New York D. Finnin/© AMNH

The American Museum of Natural History (AMNH) in New York has sued its insurer, asserting that it was unlawfully denied coverage for millions of dollars in losses that it sustained when it closed for six months because of the Covid-19 pandemic last year.

The insurer, Affiliated FM Insurance Company, has twice wrongly denied its claim to damages, the museum argues in a civil complaint that was filed on Friday in Supreme Court of the State of New York.

The museum, a hugely popular family attraction, was closed to the public from 13 March to 9 September 2020, the longest shutdown in its 150-year history. During that period, it says, the museum was deprived of its major sources of revenue—admissions fees, retail sales, parking fees, food and beverage sales, and special events—resulting in a loss of around $37m in gross earnings and in Covid-related expenses such as exhaustive cleanings.

Adding to the challenges, the museum was allowed to operate only at “greatly reduced capacity” when it reopened last September, according to the complaint.

AMNH had paid premiums to Affiliated FM amounting to hundreds of thousands of dollars annually under an “all risk” policy with the company, the museum adds.

The complaint says that under a so-called “contamination” exclusion, Affiliated FM is seeking to funnel all Covid-19 claims into two minor coverage provisions that provide, after a $100,000 deductible, a maximum recovery of $200,000, “a fraction” of the institution’s monetary losses. Other entities, from restaurants to gyms, have also sued the insurance company over its refusal to cover coronavirus-related business losses under that mechanism.

The museum notes that in declining to cover the losses it suffered, Affiliated FM claimed that there was no “physical loss or damage” to its property on Manhattan’s Upper West Side.

The museum counters that Covid, “a tangible virus that exists in the physical world and can be detected by the laws of natural science, damages property because it alters the air and surfaces and causes the property to become dangerous or uninhabitable” because of the risk that people will contract the virus.

In its written request to Affiliated FM for coverage, the museum cited state and city government health mandates forcing it to close and explained that “Covid-19 has permeated the museum and its surrounding areas,” the complaint adds. The museum cited instances of employees and contractors who had tested positive for the virus, “undoubtedly a reflection of countless more cases”.

Asked for comment, a representative of Affiliated FM said in an email: “AFM values the long-term relationships we have with our policyholders and we are proud to be leading the industry for claims service. It is unfortunate when legal matters arise because we strongly believe our insurance policies are clear on the coverage provided.” AMNH declined to discuss the complaint, as did the attorneys representing the museum at the law firm Cravath, Swaine and Moore.

The suit comes as museums across the US are struggling with the profound economic impact of the pandemic. In survey results released last month, the American Alliance of Museums estimated that three-quarters of museums reported that their operating income fell an average of 40 percent in 2020 while their doors were closed. Institutions have largely been unable to offset losses by cutting expenditures, the alliance added, and a financial recovery could take years.

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