Insurers are telling businesses their policies don’t cover coronavirus shutdown. John Morgan attorneys say they’re wrong.

As soon as Florida started shutting down because of the coronavirus pandemic, Jackie Moore, who owns a coffee shop in Winter Park, called her insurance agent to see if the shop could recoup its losses.

“My first question to her was, ‘Do I have the insurance that covers that?’" The other voice on the line delivered the solemn answer: No.

“She was so straightforward and blunt about it, that just tells me that’s the status quo of the entire industry,” said Moore, who with her business partner has owned the indie Austin’s Coffee, known for its open mic nights and collection of board games, for 17 years.

The issue has sparked a nationwide feud between business owners, who say their claims are being wrongfully denied, and insurance companies, who maintain that in most cases the situation is “uninsurable.”

Already, lawsuits have been filed in courts across the country, including in Florida, demanding insurance companies pay out claims. And in at least eight states, legislation has been introduced that, if passed, would require insurers to cover losses or change policies going forward in the event of more stay-at-home orders brought on by a virus.

Now, Orlando law firm Morgan & Morgan has thrown its might behind business owners whom its attorneys argue are being misled by insurance companies deliberately misinterpreting their own policies. The firm has so far filed lawsuits on behalf of a Fort Myers cosmetic dentist, a Kentucky brewery and a South Florida pilates studio. It expects to file more.

During a recent conference call, attorney Mike Morgan said the insurance industry is inaccurately telling customers “there is no coverage for this, that no matter what you do, your claim will be denied" and “they are purposefully discouraging people from even bringing claims.”

“Why would they do that?" he asked. "Well, they would do that so you don’t bring your claim ... so you assume the answer is no.”

Policyholders, many of whom were unexpectedly shut down for weeks under mandatory stay-at-home orders or been forced to curtail operations, are frustrated and looking desperately to state and federal relief and insurance money to shore up business.

6 workers on furlough

Austin’s Coffee, a quaint staple of Winter Park decorated with drawings of space ships and customer’s names written on the building’s orange bricks, has had to furlough its six employees, leaving Moore and her business partner to run the shop. They’ve started a makeshift drive-through, but even with that Moore said she’s only making about a third of her normal sales.

She’s applied for a federal loan through the Paycheck Protection Program but hasn’t been approved. Fortunately, Moore said, the building’s landlord agreed to a cheaper monthly payment, but she’s gotten behind on the rent for her own home.

She hasn’t talked with her insurance agent again.

“This shouldn’t be how it’s handled,” Moore said. “I think the state should have stepped in and forced the insurance company’s hand.”

But insurers are adamant that such policies don’t usually include viruses, adding that many specifically exclude them, pointing to changes that were made nearly 20 years ago when many companies rewrote policies to keep business from submitting claims for disruptions caused by fungus, bacteria or viruses following the 2002 SARS outbreak in Asia.

Daniel Schwarcz, a professor at the University of Minnesota Law School who specializes in insurance law and regulation, said if a business’ interruption policy has a virus exclusion, “it’s open and shut.”

“'We will not pay for loss or damage caused by or resulting from any virus,'" Schwarcz read aloud from an example of common policy language. "That’s very specific. If you have a virus exclusion, I don’t think you have a shot.”

Attorneys for Morgan & Morgan said the vast majority of business interruption claims from the COVID-19 outbreak should be covered and that many exclusions do not apply to the coronavirus situation. In dispute, they said, is how insurance companies are interpreting a common clause in business interruption coverage policies -- physical loss of or damage to property -- that insurers use to determine when coverage is triggered.

Insurance companies have argued that without any damage to the property, they aren’t required to pay.

"They’re wrong,” said Mark Nation, founder of the Longwood-based Nation Law Firm and who runs Morgan & Morgan’s insurance recovery group. In many cases, he said, businesses are entitled to payouts to cover normal operating expenses and profit as well as any extra expenses the businesses incurred to shut down.

“There is coverage because these businesses have sustained a direct physical loss. They’ve lost the use of their property for its intended purpose. ... If you’ve lost the use and function of your building to operate for its intended purpose, that is a direct physical loss,” Nation said. "Insurance companies are ignoring that.”

Even that argument is tricky though, Schwarcz said.

“In most cases, businesses were shut down not because of the actual presence of the virus on the premises, but the risk of future virus in the air. And that’s different. And courts have traditionally distinguished between the risk of a future event and direct physical loss to the property,” Schwarcz said.

A business’ best bet for coverage, Schwarcz said, is if their business interruption policy includes something called “civil authority coverage," which would likely require insurers to cover losses of businesses forced to close under state executive orders.

Trump weighs in

In Florida, Gov. Ron DeSantis issued a stay-at-home order starting April 1 to slow the virus’ spread that allowed only “essential” businesses to stay open. Restaurants, for instance, were forced to close dining rooms and only fill to-go and takeout orders.

“If that isn’t the cause of every single one of these closures, what is? Clearly, it’s triggered," Nation said.

President Trump weighed in on the issue during a White House press briefing, surprising some, where he appeared to side with business owners who have submitted legitimate claims.

“I’m very good at reading language, I did very well in these subjects, and I don’t see the word pandemic mentioned. Now in some cases it is, it’s an exclusion. But in a lot of cases, I don’t see it, I don’t see a reference and they don’t want to pay up,” Trump said. “I would like to see the insurance companies pay if they need to pay -- if it’s fair.''

Industry groups estimate that covering small-business losses from the coronavirus outbreak would cost between $255 billion and $431 billion per month, bankrupting the industry.

Insurance Information Institute CEO Sean Kevelighan in a statement described the lawsuits that have come forward as “frivolous" and the claims from celebrity chefs including Wolfgang Puck that they’re being wrongfully denied an unconstitutional “campaign led by the world’s richest chefs and a celebrity attorney."

"Lawyers and the trial bar will attempt to torture the language on standard industry forms and try to prove something exists that actually doesn’t exist and try to twist the intent when the intent is very clear,” Evan Greenberg, CEO of Chubb, the world’s largest publicly traded property and casualty insurer, said on a call with investors. “And the industry will fight this tooth and nail. We will pay what we owe.”

State insurance regulators have so far taken the side of insurers, with the National Association of Insurance Commissioners issuing a statement opposing "proposals that would require insurers to retroactively pay unfunded COVID-19 business interruption claims that insurance policies do not currently cover.”

Schwarcz said lawsuits will likely have to be decided on a case-by-case basis depending on each business’s situation and written policies. But realistically, he said, most businesses will lose.

Email the reporter at [email protected] and follow her on Twitter @bycarolineglenn.

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