A dispute worth millions has broken out between hotel owners and a group of major insurers over denied business interruption claims following water damage at a Delaware hotel. The hotel owners, including Amalgamated Hospitality Management II and NR Hospitality, LLC, filed a lawsuit on September 30, 2025, accusing several insurers of failing to pay out on their claims after a severe water leak at the Brandywine Plaza Hotel in Claymont.
The incident happened around October 5, 2024, when a four-inch water line burst in the hotel’s basement. The leaking water caused significant damage, including knocking out power and water supply, and harming critical systems like the fire sprinkler pump, fire alarms, and HVAC units.
According to the lawsuit, the hotel owners believed their policy covered property damage, contents, and loss of business income. They pointed to a form in the policy that indicated business income coverage was included, marked “Yes,” and listed with the phrase “Actual Loss Sustained.” Relying on this, the owners filed claims for over $825,000 for six months of lost income, which later grew to $1.5 million when extended to nine months.
While some insurers paid part of the claims, others—specifically Lloyd’s, CNA, Rokstone, and Beazley—refused to pay. These insurers argued that the policy did not clearly state a dollar limit for business income coverage and therefore did not offer such coverage at all.
The hotel owners have accused the insurance companies of breach of contract, bad faith, and estoppel. They argue that they trusted the insurers’ representations and would have acted differently if they had known there was no coverage for business losses. The complaint also calls the refusal to pay arbitrary and outright wrongful.
The legal battle is focused on how the policy’s language should be read. The plaintiffs say the wording supports their claim to full business income coverage. The case is set under Indiana law, as the policy states Indiana courts have exclusive jurisdiction over disputes.
If successful, the hotel owners are seeking millions in damages, covering lost income, legal fees, delay penalties, and punitive damages. This case could have a big impact on how business interruption claims and insurance policies with multiple carriers are handled in the future.
At this stage, the claims remain allegations with no court decisions yet. The lawsuit highlights ongoing questions around how insurance policies are interpreted and how insurers handle claims when multiple companies are involved.