This story was updated with information about a pending lawsuit against an insurance company over coronavirus coverage.
With the announcement of several states closing bars and restaurants due to the advice of the CDC regarding COVID-19, the question jumping to the top of everyone's mind is, "Will my insurance cover this"?
While no policy is exactly the same and coverage can vary wildly, I discussed the current scenario with Eric Kastendike, a partner at Kastendike Insurance Group of Maury Donnelly & Parr, Inc. in Maryland, that has clients all along the mid-Atlantic.
As expected, his phone has been ringing off the hook, so while our conversation was brief, it was very informative, although not the positive news I was hoping to receive for the industry. Coverage for COVID-19 can cross multiple insurance product lines and we discussed those most important to bar and restaurant businesses.
Please consult with your individual broker and/or legal counsel as this is provided for general guidance only.
Will Insurance Cover My Business Losses from State/City Closures?
The short answer is no. Business interruption claims are typically from a physical act and require physical damage to occur. Furthermore, many insurance claims have a communicable disease written as a specific exclusion. I inquired if operators could have paid a premium to remove this exclusion before this outbreak and Eric highly doubted this was possible.
Even with the government requiring the shutdown, it does sound like much reprieve is available. While in some past cases, like the riots of Freddie Gray that triggered a curfew in Baltimore, any physical damage from the riots and the loss of business from the hours they were closed were covered, but that is because the originating act was the riot. However, if a riot did break out in the future because the bars and liquor stores were closed and your business was damaged or looted, all of those damages would be covered.
Update- on WWLTV is reporting that Lloyd's of the French Quarter is suing its London based insurance company in what may be the first case of its kind. Lloyd's is arguing that the coronavirus living on surfaces physically damages the property, triggering the business interruption clause. We will update as more information becomes available.
French Quarter restaurant sues in what may be first U.S. coronavirus insurance dispute https://t.co/7ZdKKo8CMU— WWL-TV (@WWLTV) March 17, 2020
What Will Insurance Cover In Regards to COVID-19?
If any workers were exposed to coronavirus due to exposure at their place of employment, there may be a case for a worker's compensation claim, but the facts and circumstances to prove where this happened would need to be provided.
If a guest tried to sue the business for the negligence of remaining open knowing the risk, your insurance would also most likely cover this. Event cancellation may also be covered if the event falls under the "covered event" clause that is different for every policy.
COVID-19 is being written as an exclusion moving forward but some operators may be able to use this clause to offset lost business.
Employment practice liability protects businesses from alleged origin or medical status discrimination. In the case an employee alleges they were let go because they had coronavirus, this EPL policy may be able to provide necessary coverage.
Can A Business Reduce Their Bill?
Unlike a gym membership, a policy most likely cannot be paused or reduced in the short term to help with cash flow management since most landlords and liquor licenses require continuous coverage, whether your doors are open or not. However, every policy is different and it would behoove you to ask your agent what options you have to help survive the next several weeks.
If you were able to file a succcessful claim or have additional information to provide, please email me at [email protected] or DM @jerbatucan so I can update this story with helpful tips for other bar owners and restaurant operators.