As their losses continue to mount amid Covid-19 lockdowns, many restaurateurs and hotel owners are pressuring their insurance companies to cover business-interruption claims.

The vast majority of insurers, however, have proven less than willing to cooperate, critics say.

David Sampson, president and CEO of the American Property Casualty Insurance Association, argued that being forced to cover pandemic-related business continuity losses could essentially bankrupt the industry. 

“Many commercial insurance policies, including those that include business-interruption coverage, do not include coverage for communicable diseases or viruses,” Sampson said. “If policymakers force insurers to pay for losses that are not covered under existing insurance policies, the stability of the sector could be impacted.”

According to Robert Zarco, founding partner at Miami-based law firm Zarco Einhorn Salkowski & Brito, whether a policy includes or excludes certain types of interruptions isn’t always so clear-cut. Zarco, who specializes in franchise law, has filed business-interruption suits on behalf of numerous restaurant and hotel franchisees.

“Not all business-interruption policies are created equal,” said Zarco. “After SARS, many insurers included pandemic exclusions. However, not all policies or exclusions are drafted the same, and there are exceptions to the exclusions. If you have damage due to civil authority intervention, where you have local, municipal, state or national governments mandating a shutdown, and your business can no longer operate, does a civil authority policy step in to give you coverage? And there’s also precedent around the fact that if a property isn’t usable, it can be considered physical damage.”

Taking the battle one step further is the Business Interruption Group (BIG), a nonprofit coalition pushing insurers to pay out on coverage. Co-founded in mid-March by John Houghtaling, a partner at the law firm Gauthier Murphy & Houghtaling, and numerous high-profile chefs, including Thomas Keller, Daniel Boulud and Wolfgang Puck, the organization gained an early foothold within the restaurant sector. 

Since then, scores of other businesses, including hotels, travel companies and even large nonprofits have joined the cause. As of late April, BIG counted approximately 3,000 businesses and groups among its member base.

“We’re talking with attorneys general, insurance commissioners, the courts, politicians and the press to say, ‘Insurance companies need to pay policies that they owe,’ and we’re trying to get laws established,” Houghtaling said. “Insurance companies are certainly misrepresenting their solvency.”

Houghtaling estimated that about 30% to 40% of BIG member base policies have no exclusions whatsoever. Some policies he’s looked at even specifically offer virus inclusion.

“There are ‘all risk’ policies that have absolutely no exclusions, and insurance companies are not even paying those,” Houghtaling said. 

Moreover, BIG is lobbying to get insurance companies to not only cover exclusion-free claims but to also work with the federal government to cover policies that might typically exclude pandemics.

“Insurance policies are already measured according to how much your business needs in an emergency to stay afloat,” he said. “That’s what you pay premiums on. Federal programs are always hastily thrown together and never work properly. We’re looking for a program that does work, and that is your insurance policy.”

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