On February 5th, we predicted businesses were in for a rough time ahead. Insurance companies are in survival mode. We pay premiums for years and years and when we finally need coverage, they don’t want to pay. Five weeks later our prediction has come true. A New Orleans restaurant is suing after its insurance carrier to force it to pay claims for losses incurred as the result of coronavirus quarantine measures.
The Oceana Grill, a 500 seat restaurant in the city’s French Quarter, says it is obtained insurance through Lloyd’s of London. That insurance contained both a civil authority clause and business interruption coverage. [More on that below.] After City and State officials clamped down on revelers in the French Quarter and advised people to quarantine in place, the restaurant saw its revenue dry up.
On Monday, March 16th, New Orleans Mayor LaToya Cantrelll ordered all bars, clubs and casinos to shut down and restaurants to no longer accept dine in guests. “Our rules in New Orleans will in some cases be going further than what the state has announced. We are facing the most widespread impacts from this crisis here in Orleans, and our response must be that much more urgent,” said Mayor Cantrell
With no tourists and no dine in business, restaurant operations ground to a halt. In our experience, insurance companies will often string out the denial of a business interruption claim for months. The unspoken belief is that with no income coming in, the business making the claim will either not have the funds to sue the insurance company or will settle for pennies on the dollar. We are proud of Oceana Grill for not waiting months before suing.
The suit filed by the restaurant seeks a determination by the court that Lloyd’s must cover the losses to the business.
Many businesses have business interruption insurance. The idea is to help businesses recover lost income incurred as the result of loss, damage, or destruction to insured property by a covered “peril”. Hurricanes, floods and fires are the perils we typically imagine but coronavirus is certainly a disaster if you are in the hospitality business. Ditto if you are a manufacturing company and a critical piece of your supply chain is in China.
An example of a business interruption clause in a policy might read:
“This policy insures against loss resulting directly from necessary interruption of business caused by physical loss or damage by a peril not otherwise excluded herein to insured property of the Insured, all subject to the terms and conditions of this policy.”
As in the sample above, the language used in many policies suggests there must be “physical loss or damage” for the coverage to take effect.
Every policy is different and there have been no cases involving coronavirus claims.
Policies often also have a “government authority” provision that offers coverage if an insured is ordered to shut down. What happens, however, if the business is allowed to remain open but loses 95% of its business because of actions taken by the government? Once again, there are no coronavirus cases to establish precedent.
We have been watching industry publications and articles written by lawyers representing the insurance industry. It is obvious that insurance companies are openly looking for ways to deny coronavirus calims. That is why we are glad to see businesses like the restaurant in New Orleans fighting back.
Bad things happen every day. Accidents, hurricanes and now a global pandemic. We rely on insurance companies to be there when disaster strikes. Now it appears that after years of taking our hard earned money, some insurance companies are poised to turn their backs on us.
If you have business interruption coverage and have suffered a loss from coronavirus, we can help you navigate the complex world of claims, so-called “independent adjusters” and insurance bad faith claims. We are aggressive and not afraid of going toe-to-toe with big insurance companies and their lawyers.
To learn more, visit our coronavirus business interruption claims page. Need help reviewing your policy or pursuing a claim for losses to your business? Contact us online, by email or by phone at 800.669.7782. We have lawyers throughout the United States and accept cases nationally.
*The author is a graduate of Tulane University School of Law in New Orleans and a former police officer in the city.