Since the COVID-19 pandemic started, the restaurant industry has experienced a widespread financial loss because of mass closures, fewer customers and increased safety regulations.

1. Your Restaurant’s COVID-19
Insurance Claim Got
Denied…Now What?
Since the COVID-19 pandemic started, the restaurant industry has
experienced a widespread financial loss because of mass closures, fewer
customers and increased safety regulations. As such, many of them hoped
for loans and subsidies to help bail them out of this crisis, but the state and
federal governments never followed through on deep, radical aid that
would do long-term good for the industry. No help ever came. The little
financial assistance they were afforded didn’t stretch very far, even for
those who qualified and received PPP loans. As a result, many restaurants
filed insurance claims instead.
Predominantly, restaurants filed for a “business interruption insurance”
claim, which seems to make complete sense with the given situation on
the surface. Essentially, plans with this coverage will compensate a portion
of what the business loses after a disaster forces them to cease operations.
Reasonably, restaurants around the U.S. filed this claim soon after the
pandemic hit.
But they never saw a dime.
Defining Interrupted Business
How can so many businesses, paying thousands upon thousands of dollars
in annual premiums, not receive even a little bit of payout during one of
the most massive business interruptions we’ve seen in our lifetimes?

2. It all comes down to wording. Typically, policies that include this coverage
specifies “direct physical damage” has to be incurred in order to qualify, i.e.
a fire or a tornado. Viruses aren’t included or outright excluded by policies
that overtly state they won’t cover cases where bacterial, viral or other
disease forces businesses to a halt.
Seem accidental? It’s not. In 2002, SARS devastated the global economy
and caused significant financial repercussions for insurance companies
too. Since then, policies have changed to exclude coverage for damages
incurred by disease specifically. Though it seems malicious, insurance
companies insist that they simply can’t afford to cover all of the claims
being made over the past several months, and they would be in major
crisis if they tried to payout to all of the aggrieved clientele. Fundamentally,
privatized insurance works because a myriad of people pay premiums and
only a few cash in on them at a time.
None of that helps restaurants, though, who are going through a massive
crisis all their own. As a result, a lot of them have taken their providers to
court. By the beginning of August, more than 400 lawsuits had been filed
by small businesses against their insurance providers.
Restaurants Go to Court
Food service establishments are suing insurance companies to change the
meaning of what constitutes “interrupted business.” One restaurant,
notably located in New Orleans, argued that COVID-19 contaminates
surfaces that are difficult to clean to the extent and regularity necessary to
keep customers safe—especially in a hot, muggy climate. That’s real,
physical damage caused by the virus.
Other restaurants took a different tack. Rather than change the general
understanding of what direct physical damage means, they want to void

3. the entire argument by showing what will happen if mass closures
continue to occur. By showing how the ripple effect caused by similar
situations has impacted local economies, they can extrapolate that data to
the macro level and demonstrate how half of the restaurant industry
closing due to COVID-19 will incur serious effects the national economy.
They’re hoping that the threat of such a dark future will encourage insurers
and governments to make positive impacts now, before things get worse.
In addition to lawsuits, aggrieved restaurants are trying to draw attention
to their plight in the hope of garnering national attention, drawing
sympathy and subsequently gaining more supporters to back their side;
they’re taking drastic measures, even going as far as billboards in Times
Square. Raising awareness is the first step to effective community
organizing.
Others are bypassing the lawsuits and ads and going straight to Capitol
Hill.
Everyone Wants Legislation
Both restaurateurs to insurers are brainstorming meaningful laws that, if
passed, would greatly assist with the currently tumultuous situation.
One proposition would solve the most immediate troubles: Let the federal
government reimburse insurers who pay the claims, regardless of if the
policy language accounts for viruses or not. This would certainly be good
news considering that the court systems have already shot down several of
those 400+ filed lawsuits; at least two restaurants in Michigan had their
policy disputes denied because one judge, Judge Joyce Draganchuk,
determined that the damage had to “alter the physical integrity of the
property” to qualify for business interruption insurance. Others advocate
for a federal pandemic reinsurance program. For those unaware, insurance

4. agencies pay outside “reinsurance” companies so that, in the case of
unexpectedly large claims, the reinsurers can assist with payouts to the
person or business who filed the claim. However, pandemics of this
magnitude are too massive for even insurance agencies plus reinsurers to
handle alone. Thus they’ve proposed the inception of a federal program
which would not only assist with our current predicament but also
establish how we handle similar situations in the future. The government
and the insurance company would both pay a portion of the claims
upfront, bypassing traditional reinsurers entirely, and the insurance
agencies would reimburse the government for their portion over the
course of several years. It’s a more manageable and viable plan.
Insurance companies seek a different solution. One alternative suggests
splitting the market, so there are different precedents for small businesses
versus medium to large ones. It would be mandatory to buy coverage
unless the business specifically opts out in writing. Smaller companies, like
restaurants, would get insurance money to assist with payroll in the event
of a disaster. Medium to big businesses would buy market-based
premiums like normal except the insurance companies would transfer
most of the risk to the government reinsurance program, aptly named
Pandemic Re.
These are just a few of the alternatives being presented to the courts and
the government to repair some of the damage that COVID-19 has caused
restaurants and avoid something like this happening again in the future.
As lawsuits continue, the virus spreads, and different legislations undergo
debate, restaurants will just have to wait and see whether the face of
business insurance will change in an appropriate, tangible way…or if they
just have to keep helping each other weather the storm instead.