Restaurants are moving to sue insurers or pressure their local legislatures to get their insurance companies to payout on business interruption caused by the coronavirus. Many insurers are refusing to pay clients thanks to convenient exception clauses for viral outbreaks that were instituted after the SARS outbreak in 2003.
Some insurance companies that lack the exception are still refusing to pay out clients claiming that government-mandated absence of customers does not amount to physical damage to the restaurant property.
Restaurants across the country were forced to either close their doors entirely or adapt their service to to-go only as stay-at-home orders forced closure of dine-in service to prevent the spread of the novel coronavirus starting in March.
Some restaurateurs are looking to state officials to protect their businesses from the blatant negligence of these insurers. U.S. Representative Mike Thompson (D-California) introduced a bill in mid-April to force insurers to pay their clients regardless of any virus exception clauses, as have several other states. Others are looking to litigation to resolve the dispute, although the efficacy of that strategy is grim as the already-sluggish court system is also effectively shut down for the same reasons.
Renowned Chef Thomas Keller – owner of the eponymous restaurant group which includes world-famous Napa Valley restaurant The French Laundry – says his insurance was supposed to cover “civil authority shutdowns” including due to pandemics but insurers have told him and others those instances are not covered. Furthermore, the WHO and CDC statements that the virus may live on surfaces for hours to days constitutes a “dangerous property condition,” which should also be covered by insurance, according to an article Keller wrote for NBC. And yet, the insurer is refusing to pay.
The government-mandated shutdown of dine-in service has highlighted the important role that restaurants play in local economies. Closing restaurants – and not just Michelin-rated ones – not only affects customers’ enjoyment of great food and beverage, but also employment for millions of hourly workers, purveyors, vendors, and farmers, among others.
Make no mistake that it is a moral imperative for both our collective citizenry and our civic leadership to do what it takes to protect the lives of its citizens and minimize the impact of this deadly virus. And yet that task need not be mutually exclusive to protecting the financial security of the service and hospitality sector – one that is core to healthy communities.
According to a CNN Business report The American Property Casualty Insurance Association claims that retroactively rewriting policies “could put the insurance industry at risk.” Insurance companies exist to protect individuals and businesses from unanticipated disasters. If anyone in this economy should be taking a hit for the impact of closures – it should be the insurers, not restaurants and their workers.