Everything Restaurants Need to Know About Filing a Business Interruption Insurance Claim

COVID-19 , Insurance ,

Source: FSR

COVID-19 has caused seemingly irreparable damage to the restaurant industry. The pandemic and subsequent government-ordered shutdowns have caused restaurants to close their dining rooms and rely on takeout orders alone to bring in revenue.

Restaurant closures are impacting the livelihoods of owners and employees alike. It’s estimated that 8 million restaurant workers were unemployed due to COVID-19-related shutdowns at one point and that the restaurant industry will see $240 billion in losses by the end of 2020.

Restaurants typically run on tight margins as is. So, to see such quick and monumental losses to revenue is staggering to even the most seasoned owners. Unfortunately, roughly 3 percent of restaurants in the U.S. have already had to shutter their doors for good due to the pandemic, and senior members of the National Restaurant Association warn that that number is likely to rise.

In an effort to keep their businesses afloat during these tumultuous times, restaurant owners have turned to their insurance companies to file business interruption claims—a type of policy meant to protect restaurant owners from losses when they are unable to run their businesses as usual. Unfortunately, hundreds of restaurant owners who have filed these claims have been denied, leading to a backlash against insurance companies and an influx of business interruption insurance lawsuits.

Here’s what you need to know about filing your claim and what you can do to hold fraudulent insurance companies liable if you are denied.

Steps for filing a claim with your insurance company

If your restaurant has been affected by COVID-19, you may be able to file a claim with your insurance company. When you’re ready to file a claim, follow these steps:

Read through your policy from start to finish

Before filing your claim, you need to be aware of the ins and outs of your policy. Reading the fine print of your policy will not only help you understand your coverage, but it will also prepare you for any pushback from your insurance company.

Keep an eye out for verbiage in your policy related to viruses or viral pandemics

As you read through your policy, keep an eye out for specific language related to viruses or viral pandemics. The inclusion of this verbiage (or lack thereof) may affect how your claim will be handled. 

If your policy makes no mention of viruses, it can be argued that your insurance carrier did not intend to exclude this type of coverage. Conversely, if your policy does include language related to viruses, it can be argued that there are legal theories supporting business insurance policies accepting claims for coronavirus.

File your claim

Once you’ve read your policy it’s time to file your claim. When calculating your total damages, be sure to include losses related to:

  • Net profit
  • Overhead
  • Labor
  • Physical damage

Update on where current litigation stands

Restaurants across the country have been seriously impacted by the COVID-19 pandemic and subsequent social distancing mandates. In an effort to survive the pandemic, many restaurant owners have submitted business interruption claims. Unfortunately, many of these claims have been denied, leading to an influx of lawsuits against insurance companies.

As of May, there were 120 pending lawsuits against 33 different insurance companies, including insurance behemoths like USAA, State Farm, and Liberty Mutual.

In-N-Out Burger filed a lawsuit against its insurer, Zurich American Insurance Co., after its business interruption insurance claim was denied. In its complaint, In-N-Out argues that it has a $250 million “all-risk” policy with Zurich, which is supposed to cover common risks as well “novel risks that may arise which were not previously considered by the company.”

Five restaurants and a catering business owned by San Antonio-based restaurateur, Jason Dady, also joined the legions of restaurants filing suits against insurers. Dady’s insurance company, Acadia Insurance Group, denied the restaurants’ claims based on the policy’s virus exclusion; however, Dady’s restaurants say they are claiming physical loss due to local government orders to shut down dine-in restaurant services.

Many more lawsuits are certainly expected as more restaurant owners’ business interruption claims are denied. 

What steps you can take if your claim has been denied

If you’ve filed a claim with your insurance carrier for losses related to COVID-19 but were denied, you may be able to take your claim to court.

However, you can guarantee that your insurance company will have legal counsel ready to fight your complaint in court, so if you feel your claim has been wrongfully denied and you want to take action, it’s best to meet with an attorney. An experienced attorney can review your policy and not only determine if your restaurant is eligible but also help you get the most compensation.

The bottom line

Insurance companies have wrongfully denied the claims of restaurateurs across the country in order to keep from being held liable for billions of dollars in losses related to the COVID-19 pandemic. As a business owner, it’s imperative that you know you have rights under your insurance policy and that your insurer has an obligation to fulfill its duties listed under those policies. Should your insurer deny those obligations, protect your business and hold insurance companies liable by seeking legal counsel.