Wagner Shoes among businesses denied COVID-19 coverage nationwide

Apr. 22--Wagner Shoes in Tuscaloosa is likely the first of many small businesses to take its insurance company to court after being denied COVID-19 related coverage.

Attorney Matt Glover filed a federal lawsuit on behalf of Wagner's last week after Auto-Owners Insurance Co. denied their claim. Most small businesses have "business interruption coverage," but across the country, insurers are saying pandemics aren't covered in their policies.

On March 26, Mayor Walt Maddox issued an order closing all non-essential businesses in the city, which was followed by a statewide order issued by Gov. Kay Ivey the following day.

Wagner LLC filed a claim on March 27 for contractual property, business interruption, and other damages. The insurance company denied Wagners' claim without conducting an investigation, Glover said.

"Small businesses are our nation's largest employers," said Glover, of Prince Glover Hayes in Tuscaloosa. "Many purchased business interruption insurance coverage for times just like this. They are being denied the protection they purchased. We are glad to be on their side in this fight."

Glover is representing the business along with Birmingham insurance coverage attorney Ted Colquett.

"Small businesses are our nation's largest employers," he said. "Many purchased business interruption insurance coverage for times just like this. They are being denied the protection they purchased. We are glad to be on their side in this fight."

The Wagner company has operated in Tuscaloosa since 1953 and now operates Wagner's Shoes for Kids, Wagner's Runwalk, The Athlete's Foot and Wagner's Team Sports.

Across the country, companies are learning their property insurance policies don't apply to mandated closures caused by COVID-19.

In many instances, claims are rejected because the policies include a specific exclusion for losses due to "virus or bacteria," a legacy of the SARS outbreak of the early 2000s. Insurance company adjusters are also citing a more nuanced explanation, namely, that the shuttering of businesses due to coronavirus was not related to nor did it cause actual property damage, as in the case of a fire or hurricane.

The insurance industry has been quick to point out in online postings and in letters to legislators that insurance companies would be financially crushed by payouts to businesses for their coronavirus-related losses if forced to change their policies retroactively, as some lawmakers have advocated.

The American Property Casualty Insurance Association, the primary national trade association for insurers, calculates that such losses for small businesses with 100 or fewer employees could approach a staggering $383 billion per month, while the total surplus for all of U.S. insurers is $800 billion.

Bottom line, says Robert Gordon, head of research and policy for the property insurance association, there's a reason the insurance industry doesn't provide coverage for a pandemic.

"The basis for insurance is that everyone pays a little bit to compensate for the catastrophic losses that hit the few," he said. "But with a pandemic, everyone is having catastrophic losses at the same time. It would be like the industry covering auto accidents all happened at the same time."

On its website, the Insurance Information Institute offers guidance to insurers, saying business interruption policies generally require the losses to be caused by physical damage to the property and the threat of virus is not considered physical damage.

Still, the ongoing debate over business interruption coverage is not likely to be quelled anytime soon. Multiple lawsuits have been filed by restaurateurs in Chicago, New Orleans and California.

In a pre-emptive move last month, New Orleans attorney John Houghtaling filed a lawsuit on behalf of acclaimed restaurateur Thomas Keller of French Laundry fame, hoping to secure a ruling declaring that when a governmental entity shuts down businesses because of a "dangerous property condition in the area," that triggers coverage.

He filed the suit when he began hearing that Keller's insurance carrier, The Hartford, was denying business interruption claims throughout California.

Houghtaling rejects the insurance industry's stance that the government orders to effectively shutter businesses had nothing to do with concerns about property damage to businesses. He points to the verbiage of various orders, including San Francisco's, where it states that its emergency declaration was issued because the virus is "physically causing property loss or damage due to its proclivity to attach to surfaces for prolonged periods of time."

"The insurance companies don't want to talk about the danger coronavirus poses to property because then they would owe for the entire time the businesses are shut down," Houghtaling said. "They're crying, poor us, don't let us go bankrupt, we only have $822 billion in cash. You've got to be kidding. If you hold that money any longer and the economy collapses, that's $1 trillion to the economy each year for just restaurants."

Material from the San Diego Union Tribune via The Associated Press was used in this report.

See other coronavirus coverage here. This content is being provided for free as a public service to our readers during the coronavirus outbreak. Please support local journalism by subscribing to The Tuscaloosa News at tuscaloosanews.com/subscribenow.

Map of coronavirus cases and deaths in the US

___

(c)2020 The Tuscaloosa News, Ala.

Visit The Tuscaloosa News, Ala. at www.tuscaloosanews.com

Distributed by Tribune Content Agency, LLC.