The economic devastation of the COVID-19 pandemic is cratering the restaurant and retail sectors, where the necessary government shutdown for non-essential businesses has quickly crippled thousands of companies. Unlike many other businesses that have a robust online component, restaurants, of course, are an in-person experience and are all about sharing: sharing a physical space, being served by a wait staff that handles your plates and beverages, and eating food prepared by other people. The social distancing guidelines have made all of that impossible, and even those restaurants that remain open for drive-through or carryout are struggling to survive on a fraction of their normal revenue stream.  The owners and operators of these businesses, along with their entire supply chain, are the heart of the local economy, employing staff, paying vendors, supporting our farmers, owning or leasing real estate and serving as a key attraction for residents, businesses and tourists.  

This pandemic has created a perfect storm for these companies, but one that responsible business owners have prepared for by contracting insurance companies to protect them, and by paying their regular premiums to have a financial safety net if something happens to their business. Well, it has.  So, imagine the surprise of many restaurant owners when they filed a claim for COVID-19 business interruption losses and were told those claims were denied.

These restaurants have been more than willing to do their part and follow the important governmental guidelines to get us through this pandemic, but now desperately need to get that insurance money - that they’ve paid premiums for - to keep them going and pay their employees and their bills.   

The devil is in the details here and there are several parts of insurance policies that are at the heart of the discussions:

-Does a policy cover “All Risks” against loss or physical damage or is there “Stated Peril” for loss or damage to policies based on certain, covered causes?

-Is there coverage for losses due to decisions or directions by a Civil Authority, like the government directed shutdown of non-essential businesses?

-Is there a Virus Exclusion that does not cover losses due to viruses or bacteria, which could be general or name specific viruses or bacteria?

Regardless of the language in their policy, business owners should file a claim in writing to determine their insurance company’s response and, if the claim is denied, consider a conversation with a legal expert to have their policy reviewed and consider possible next steps, which could include the filing of a legal complaint to bring in the judicial system to review the insurance contract and declare whether or not coverage is deserved.

The insurance industry will say that payment on COVID-19 business interruption claims will bankrupt their industry, but that remains to be seen. What we do know is that the insurance companies have collected billions of dollars in premiums that should first be paid to policyholders to keep those smaller businesses from going bankrupt.  If the pandemic leads to critical financial strain on the insurance industry, then those enormous corporations should turn to the federal government for a bailout, very much like what is being given to the airline industry. But for the insurance industry to withhold critical funds from the businesses on Main Street to protect their own interests is not just shameful, it will ultimately be crushing to our economy.

Many in Washington agree, and on March 18, 2020, a bipartisan Congressional group wrote a letter to leaders of insurance industry groups saying, “We urge you to work with your member companies and brokers to recognize financial loss due to COVID-19 as part of policyholder business interruption coverage.” The insurance leaders provided a tepid reply, saying they will support the community and be lenient on premium payments at this time. 

These business interruption claims to recover COVID-19 losses certainly apply to restaurants, but there are other types of retail and service businesses that should take a closer look at their insurance policies and consider accessing this important source of funding, as well. These thousands of businesses are essential to our community and our economy. This matters to all of us, and we don’t have much time to help these businesses save themselves.