Looking for Covid-19 relief, restaurants sue insurers who refuse to pay

Jun. 8--In the event of a blizzard, flood or fire, Mark Hutchinson could always look to his insurers for help in keeping his string of restaurants afloat.

But what about a global pandemic?

The owner of Hutch's says the answer from his insurer is no, the Covid-19 outbreak is not an insurable event.

"Business owners pay premiums for years to ensure they're protected, not to be abandoned at times of crisis," said Christopher Berloth, one of the lawyers representing Hutchinson's company.

In a new lawsuit, Hutch & Associates, which also owns the Remington Tavern in North Tonawanda, point to the "business interruption" coverage in its commercial insurance policy and says Erie Insurance was wrong to deny its claim.

Hutch's and the Remington Tavern, both well-known dining spots, have been closed since March 16, although the Remington Tavern continued to serve takeout and has since opened its patio.

The suit seeks to become a class action on behalf of other policyholders and is part of a larger trend unfolding across the country, the latest consequence of a virus that shuttered businesses and hit the restaurant industry particularly hard.

Those same restaurants are now learning their insurers don't always cover virus-related losses, often because of pandemic exclusions in their policies or a lack of physical damage to the business.

"Given the unpredictability and unimaginable potential for worldwide losses, insurance is simply unable to cover a global pandemic," Sean Kevelighan, head of the Insurance Information Institute, a national industry group, said in a statement.

Like Hutch's, Buffalo Xerographix in Tonawanda is challenging its insurance denials in court and seeking to turn its lawsuit into a class action. The defendants in the case include Hartford Insurance, New England Insurance and Pacific Insurance.

Salvatore's Italian Gardens, one of the region's most well-known dining venues, is also suing its insurer.

After the SARS crisis in 2003, the insurance industry began addressing the risks of viruses and bacteria and one of the first steps was writing specific "virus exclusions" into some commercial policies.

Buffalo Xerographix, which helps other businesses manage documents and information, says there is no such exclusion in its policy.

"Insurers are denying claims with little or no investigation into an insured's specific facts," said Berloth.

To hear him talk, the denials are part of a larger plan for avoiding claims.

The insurers, Berloth said, are required to communicate with policyholders about Covid-19 coverage and are using those communications to discourage and preempt claims.

Their message is "don't waste your time filing," he said.

Like Hutchinson, restaurant owners across the country are taking their insurers to court and the fight is attracting the support of celebrity chefs such as Thomas Keller, Wolfgang Puck and Cat Cora.

With the help of other big names, they formed the Business Interruption Group and used the organization to publicly accuse the insurance industry of "putting tens of millions of people on unemployment lines."

"I paid business interruption insurance for the last 38 years," Puck told the Los Angeles Times. "They make an excuse and say the virus is not really included in your insurance. Well, the virus really didn't shut us down. The government shut us down. They should pay up. And the government should bail out the insurance companies the same way they do with the airline industry."

The campaign to force insurers to retroactively provide Covid-19 coverage is also gaining ground in state capitals across the nation, including Ohio, New Jersey and Massachusetts.

A new bill in the New York State Assembly would require coverage for all insured companies with 100 employees or less.

The industry is fighting back and recently suggested the "world's richest chefs" are asking for the retroactive rewriting of policies, which is both unconstitutional and unwise.

Insurers claim it would put their industry at great financial risk and threaten their ability to pay covered claims by homeowners, workers and drivers.

"Tragically, millions of businesses across the country have closed their doors because of government-ordered shutdowns," Matthew Sturdevant, a spokesman for Hartford, said in a statement. "Unfortunately, viruses are generally outside the scope of business interruption coverage due to the absence of any physical damage."

The industry thinks the business losses caused by Covid-19 are simply too big for private insurance companies to absorb. Their answer is the federal government and, more specifically, a proposal for a federally financed program known as the COVID-19 Business and Employee Continuity and Recovery Fund. Advocates say that fund would be modeled after the 911 Victims Compensation Fund and help businesses hit hard by the coronavirus shutdowns.

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