Will restaurants be able to cash in on business interruption insurancefor losses caused by COVID-19 closures? This is the question legal teams will be grappling with in the coming months as eateries and bars struggle for survival.
What is business interruption insurance?
It is a type of coverage included in about one-third of all business insurance policies. If you have what is considered an “umbrella” or “all-risk” policy, you may have insurance that compensates your establishment if a civil order forces you to close your doors temporarily. Typically, this policy extension covers fires, hurricanes, tornadoes, gas leaks, and water main breaks. State and local government lockdown and shelter-in-place orders could be covered under this type of insurance.
A strong claim would involve a circumstance where you were forced to completely shut down and had no access to your restaurant, versus a case where you were still doing takeout operations.
What to look for in your business interruption coverage
In addition to the phrase “business interruption,” lawyers are combing policies looking for other buzzwords:
- Act of God coverage – covers floods, fires, earthquakes, natural disasters, and the 9/11 terrorist attacks.
- Civil authority coverage – occurs when federal, city, or state government mandates business closure.
- Communicable disease coverage – includes loss and mitigation cost of communicable diseases.
- Contingent business income coverage – kicks in when there are supply chain interruptions.
- Crisis management coverage – covers break-ins, armed robberies, food contamination, or disease.
- Dangerous substance coverage – some policies have covered asbestos remediation efforts.
- Physical loss or damage coverage – may require physical threats like smoke, chemical odors, or e-coli.
Some policies carry explicit exclusions for viruses, pandemics, contamination, or pollution. We anticipate insurers were quickly adding these clauses onto policies once the pandemic started. However, if this policy language was not already specified, you might have a perfectly valid claim.
Will COVID-19 relief come for restaurants?
Bipartisan House lawmakers have urged insurance companies to recognize losses from the coronavirus as part of their business interruption coverage. States like Massachusetts, New York, New Jersey, and Ohio have proposed bills that would retroactively force insurers to include the pandemic in their coverage. However, state insurance regulators have pushed back, warning of “greater instability” and insurance industry collapse.
Meanwhile, insurance trade groups have proposed the creation of a federal business continuity program run by FEMA. It would cover revenue replacement assistance for up to 80 percent of payroll and expenses for restaurants and small businesses. Some small business owners hope insurers will propose a modest lifeline for the small businesses they insure– like $50,000, for instance– to help restauranteurs get back on their feet, re-hire staff, sanitize, and reopen.
Contact us for assistance with coronavirus business interruption insurance for restaurants
At this point, taking the word of your insurance broker or insurance company that you “have no claim” is inadvisable. Their best interest is to dodge liability to avoid paying a huge number of costly claims. They’re sitting on over 822 billion dollars that they’re not eager to part with.
Ideally, you’ll want to work with a contingency-based law firm like Douglas & London, as opposed to a lawyer who charges by the hour. We can help you prepare the claim and file a lawsuit on your behalf should the insurer deny coverage. It could take a few noteworthy rulings in court before we start to see these claims move at a more rapid clip. Getting started sooner rather than later will ensure you don’t end up at the end of the queue.
Call now for a free consultation with a New York City business interruption insurance attorney. We are accepting cases throughout New York State, including New York City and the Tri-State area.
Additional Resources:
- Restaurant Business, https://www.restaurantbusinessonline.com/operations/restaurants-get-no-relief-business-interruption-insurance.
- Washington Post, https://www.washingtonpost.com/business/2020/04/02/insurers-knew-damage-viral-pandemic-could-wreak-businesses-so-they-excluded-coverage/