Updated: March 31st at 10:11 pm EST with news from New York
Wednesday evening, acclaimed Chef Thomas Keller of French Laundry and Per Se joined a growing list of operators suing their insurance companies to cover their losses under the business interruption clause in their policies. While the latest $2.2T stimulus package might provide relief for employee benefits, rent, and other utilities, it doesn’t cover lost sales as insurance would.
It was reported by The Wall Street Journal that Oceana Grill in New Orleans was one of the first locations to sue Lloyd’s of London back on March 18 to cover their lost business due to the mandated shutdown. The state of Louisiana was a bit slower to issue mandated closures and is currently one of the fastest-spiking cities for coronavirus outside of New York and California.
Both Oceana Grill and Thomas Keller are represented by the same laywer, John Houghtailing. As reported by Eater San Francisco, Houghtaling notes, "The insurance industry is denying the fact that the coronavirus poses a danger to property.” For most business interruption clauses, physical damage needs to be present for the claim to be successful.
Additionally, The Oklahoman is reporting the Chickasaw and Choctaw nations have filed lawsuits (paywall) against their insurance companies due to their casinos being shut down by the coronavirus. Lawfirm Whitten Burrage of Oklahoma City says, "the property has been damaged by the virus and the pandemic because it cannot be used for its intended purpose. They are additionally pointing out the business interruptions by a civil authority that is the CDC.
On March 31st, 2020, law firm Helbraun Levey reported they will also be suing their client's insurance program to cover business interruption. Furthermore, Assemblyman Joe Lentol reported that he was a co-sponsor for bill A. 10226 that was introduced into the NY State Assembly which would require insurers to pay out during the period of the 2019 pandemic.
Why This Isn’t Covered
The reason nearly all insurance policies across the country—and even globally—are claiming they do not have to pay out dates back to 2006. After SARS and Ebola outbreaks, the Insurance Service Office created exclusions to their policies for viruses or bacteria related to commercial property.
Looking at Northstar Mutual’s policy dating back 14 years ago, one can read that the clause specifically says “we will not pay for loss of damage caused by or resulting from any virus, bacterium, or other micro-organisms that induces or is capable of inducing physical distress, illness, or disease.” Nearly all policies have this same CP 01 40 07 06 clause within their policy.
Legislation Options
After September 11, New York City passed laws that helped businesses with their insurance with the Terrorism Risk Insurance Act. Similarly, New Jersey has a new bill proposed, A-3844, that would require providers to pay out under business clause insurance.
It's not just restaurants and bars that are pursuing legal action against insurance companies. Construction companies and other small businesses are reviewing their options as well. It's important to file a claim whether it has merit or not as if the law does change, expect to see a massive influx of claims. Those who have filed first have a higher chance of receiving payment before the coffers are empty.
At this time, there are no other states reporting similar legislation but if this does pass in New Jersey or any of these lawsuits are successful, we can expect a domino effect across the country.
Editor's Note: This Chickasaw and Choctaw lawsuit was added to this article. The New York Bill and lawsuit were also added to this article.