Cambridge restaurateur throws support behind business interruption insurance bill

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After closing full-time operations at all three of his restaurants in Cambridge, Somerville and Boston, the Smoke Shop BBQ owner and pit master Andy Husbands is getting creative about taking care of his staff, but he knows it's not enough. Right now, he believes the most immediate action the state can take to support service industry employees is passing a particular bill -- SD.2888 -- up at the State House.

When Husbands first saw the outbreak coming down the line, when he knew things were going to be closing, he was hoping his business interruption insurance would kick in. However, a form filed in 2006 by the Insurance Services Office, called "Exclusion for Loss Due to Virus or Bacteria," prohibits commercial property insurance policy holders from filing a business interruption claim related to an outbreak like the coronavirus.

The bill, An Act concerning business interruption insurance, would require insurance companies to pay for those business interruption claims for restaurants with fewer than 150 employees, but there's more to it than that. The bill establishes the payout as a sort of emergency relief, so insurance companies would have to pay the claims, but would then be immediately bailed out by the state. Over time, the state would tax the insurance companies until that amount was paid back.

"We're trying to get everybody behind it," said Husbands. "The insurance companies are not excited about it but it should not harm them: the insurance companies know how to pay out claims, how to deal with fraud, what's fair, and every policy is different. This is a way that restaurants would become whole -- not get a profit, but get expenses covered -- and insurance companies would get paid."

Behind the bill

With three locations, Husbands pays "a lot" every year for insurance, but he emphasized that he didn't want to paint insurance companies as the bad guys. To him, this is about using the systems in place to support businesses as fast as possible.

That was the goal for the three-page bill drafted by Joshua Bowman, partner and chairman of the hospitality practice group at Boston's Sherin and Lodgen law firm, and filed by and Sen. James Eldridge (D -- Middlesex and Worcester). After speaking with some restaurant clients in mid-March, Bowman learned about a bill filed in New Jersey to use insurance companies as a conduit for stimulus money. Using that bill as a starting point, Bowman worked with Eldridge and fellow law colleagues to write the Massachusetts bill which Eldridge filed on March 24.

"It's amazing what ordinary people can do if they put their minds to it," said Bowman. "We have an incredible democracy in Massachusetts with incredible legislators who are all looking for good ideas on how to help people through this crisis."

The bill includes an emergency preamble, which emphasizes the urgency of passing it as an emergency law to preserve "public safety, health, and convenience."

"The hotel industry has lost three million jobs since this started and is projected to lose a lot more than that," he said. "A lot of state lawmakers were waiting to see what the federal government was going to do, but the $2 trillion stimulus CARES Act does almost nothing to help restaurants and hotels."

Bowman detailed how the Paycheck Protection Program (PPP) effectively shuts out these businesses. In order to apply for a PPP loan, a business has to commit to retaining at least 90% of its workforce, which Bowman said is near impossible for host restaurants and hotels. Businesses that retain the workforce and pay at least 75% of wages will have the loan forgiven and essentially turned into a grant, but anyone unable to do that will have to pay back the loan in two years. While law firms, accounting firms, and architectural firms get a grant, he said, restaurants will just get more debt.

"The timing is not critical," said Bowman. "For any state legislators that were sitting back and hoping the CARES Act would come and bail out the hospitality industry in Massachusetts; that simply did not happen."

Cambridge's Rep. Mike Connolly and Somerville's Rep. Denise Provost co-sponsored the bill. Connolly said he is proud to support the bill, and noted his other work to pause commercial evictions in order to protect small businesses from displacement.

"Right now our restaurants, retail establishments, and other local businesses find themselves in the position having purchased and dutifully paid for insurance coverage to protect against business interruptions, only to now be told that their insurance might not be any good in this time of coronavirus-related shutdowns," he said. "Frankly, that's outrageous -- for what good is having business interruption insurance if you can't use it the one time you actually need it? ...I will continue working with colleagues and our local business community to advance this urgently-needed legislation."

Surviving in the meantime

Husbands said surviving this has reminded him of getting through 9/11, the Marathon Bombings, and the stock market crash of 2008: he's had to just put his head down and do the work.

"The first thing we did [after we closed] is we paid everybody the money we owed them," he said. "Then we gave them all of the food out of our walk-in [refrigerator], but a lot of our employees are struggling really hard."

Husbands is still doing delivery via Caviar and Doordash every Friday night, rotating between the Somerville, Cambridge, and Boston locations, but to support employees he's also been teaming up with Flour Bakery for a pop-up every Saturday. Each week, the two businesses pre-sell boxes of barbecue and pastries, and all proceeds go to staff. Anyone interested can find info on Instagram at @thesmokeshopbbq and at bbqpastrypopup3.eventbrite.com.

In the end, he said, this bill is not about profit, it's about people needing to survive.

"What is the urgency? This is about people eating and paying rent," he said. "Another way to look at it is this is putting people back to work. There will be restaurants that won't make it -- don't think that just because your favorite restaurant was busy they will be fine, make it -- and where will those people work?"

Husbands emphasized that this isn't just about restaurants; it's about hairdressers and anyone in the service industry.

"Just call your senator, it's not that hard," he said. "Everybody knows somebody that works in this business. Let's mobilize and get this done."

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