Century 21, a New York based department store chain that recently filed for bankruptcy, has reportedly sold a stake in its legal battle for owed business interruption (BI) claims related to the pandemic.
According to Bloomberg law, the embattled store has sold the rights to the $175 million of COVID-19 BI claims that insurers could potentially have to pay out on.
The proceeds from the sale of these claims will help Century 21 repay creditors after it closes, having already filed for bankruptcy back in September.
The buyer for the BI claims rights has not been revealed and the sale price was not disclosed either, but it is thought that the proceeds will be at least enough to pay off Century 21’s secured debt, which totals more than $50 million.
So far, in the US, legal battles over the status of pandemic BI claims have mostly ended up favouring insurers.
But elsewhere courts have sided with policyholders, such as in the UK where insurers are currently contesting the earlier verdict on the FCA’s BI test case.
So clearly, some parties are willing to gamble on the fact that more US cases will eventually begin to reflect this judgement, forcing insurers to pay out on owed claims.
The Century 21 deal represents the first secondary market deal for COVID BI claims seen so far, but it could lead to more, particularly if it ends in success for the buyer.
Furthermore, an increase in deals could itself lead to more claims falling to insurers and reinsurers, as the buyers of the rights to the claim will no doubt pursue it vigorously, and potentially with more financial and legal weight than the original policyholders may have had.
Targets of Century 21’s lawsuit include units of Allianz SE, Great American Fidelity Insurance Co. and Liberty Mutual Insurance Co.
