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.”