Denied: Businesses find insurers don't cover losses from pandemic

Mar. 28--ROCKFORD -- Small businesses nailed by the one-two punch of the novel coronavirus pandemic and executive orders to shut down their operations are being hit with a new haymaker.

Many have discovered that their business interruption insurance policies do not cover losses caused by the COVID-19 pandemic, said Michael Leifheit, 74, owner of the Irish Rose.

"The insurance companies have a squirrel clause that concerns viruses and that's what is screwing everyone," Leifheit said. "We have been paying business interruption insurance all along and if I had my business interruption insurance I would be OK. That's what it's there for."

Leifheit, who opened the Irish Rose in 1990, said he attempted to stay open for takeout service after Gov. JB Pritzker on March 15 ordered bars and dine-in restaurants closed in an effort to slow the spread of COVID-19, the potentially fatal respiratory illness caused by the coronavirus.

But Leifheit said he was losing more money than he was making and had to close. He sold at cost the corned beef left over from St. Patrick's Day cancellations and gave most of his remaining food stock to employees who wanted it.

He is applying for a countywide special emergency bridge loan program put together by the city in collaboration with eight area banks and the Rockford Local Development Corp. that could allow him to pay his bills for about three months until federal disaster relief loans with favorable interest rates come through from the Small Business Administration.

Leifheit said he hopes his staff will return to reopen the business once the crisis passes.

"I've exhausted some of my personal financial savings already and I'm going to have to do some more," Leifheit said.

Rockford Alderman Chad Tuneberg, R-3, said many of Rockford's small businesses are in the same boat.

Although they have been paying premiums for business interruption insurance, they are surprised to find that although it would pay for "acts of God" like tornadoes, hurricanes and other natural disasters, they aren't covered in case of a viral outbreak.

"Some of them are in desperate times and we need to find a way as a community to step up to the plate for them," Tuneberg said.

Business interruption insurance is designed to cover business losses resulting from physical damage, said Matt Ripplinger, president of Broadmoor Agency Inc. in Rockford.

There is no insurance that Ripplinger is aware of that would cover losses resulting from this pandemic. Nor would insurance cover losses caused by war, he said.

"There is property coverage and there is liability coverage," Ripplinger said. "From a property coverage standpoint, this has to happen as a result of a covered peril. Rain, fire, windstorm, these kinds of things. Those kinds of things do property damage to your building."

Octane Interlounge owner Patrick Alberto said he has cut hours and staff, but is offering lunch and dinner takeout service. He and his wife, Megan Alberto, are doing most of the cooking, cleaning and serving. He previously had a staff of six.

Alberto said that although his business interruption insurance will not cover his losses, he has not lost hope. He is also seeking loans to help make ends meet until the pandemic passes. He noted that Octane had survived in downtown Rockford for more than two decades and that he expects it to survive now.

"I am very optimistic about surviving this, but everybody who survives will come out scathed," Alberto said. "Most people won't even come back from this -- some businesses will close for good."

Jeff Kolkey: 815-987-1374; [email protected]; @jeffkolkey

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