Insurance Companies Deny Business Claims During COVID 19 Pandemic

As the spread of COVID-19 decimates the nation’s restaurant industry, business owners have pored over their insurance policies with hopes of discovering a safety net, only to learn that insurers are unwilling to payout coverage for losses tied to the pandemic. Through court battles and lobbying, restaurateurs are hoping to lock insurance firms into agreements that will provide the industry’s policyholders with cash payments needed to ensure their businesses can reopen when the pandemic settles.

With restaurants putting their operations on hold indefinitely to limit the spread of coronavirus, many frustrated phone calls this past week have centered around business interruption insurance, a type of insurance policy that triggers cash payout to cover lost revenue when disasters strike and force businesses to cease operations.

Colorado restaurateur Bobby Stuckey, of the award-winning Frasca Food & Wine Group, faced these hurdles when he filed business interruption claims this week. Following the government-mandated closures of the dining areas for his bars and restaurants in Denver and Boulder, he says insurers first rejected him on the grounds that their business interruption coverage doesn’t extend to civil authority. This coverage typically applies to losses that stem from a government entity prohibiting access to an insured’s business because of damage at a nearby property. The group was rejected a second time because its policy contained a virus exclusion clause.

Already, the brawl over whether insurance firms will be on the hook for restaurants’ coronavirus coverage has entered the court system. After government-mandated closures in light of the coronavirus, the seafood restaurant Oceana Grill in New Orleans filed a lawsuit against Lloyd’s of London earlier this week, seeking a declaratory judgment that the insurer should cover related business interruption losses.

But amid cries for a bailout and aid for the restaurant industry, state legislators in New Jersey proposed legislation that would require insurers to provide coverage for small businesses’ business interruption claims during the COVID-19 spread, which Lyons of Herrick’s says could inspire similar bills among other states’ legislators, or even at the federal level. Stuckey, meanwhile, has conferenced with restaurant industry leaders across the nation, with the aim of lobbying Washington to pressure private insurers to loosen their purses for policyholders in the hospitality industry.

On March 26, Politico reported that House lawmakers urged insurance companies to recognize losses from the coronavirus as part of business interruption coverage in a bipartisan letter.