On March 25, the day after the state of Virginia ordered restaurants and bars to close as part of its efforts to beat back COVID-19 transmissions, The Jasper bar in Richmond’s bohemian Carytown district filed a claim on its business interruption insurance policy. Like thousands of businesses across the country, its claim was rejected, leaving it with scant resources to weather the pandemic.
“It’s supposed to be the backup plan when you’re down, but instead we’re getting kicked,” Mattias Hagglund, The Jasper’s owner, told the Richmond Times-Dispatch.
Now Mr. Haaglund is working with The Hospitality Industry Re-Imagined Security Trust, or THIRST, a national advocacy group that is raising awareness of business interruption claims and the insurance industry’s almost universal rejection of them.
Following the SARS and MERS viral outbreaks in the early 2000s, the insurance industry slipped boilerplate exclusions into their commercial property and business interruption insurance policies. The industry argues that these exclusions and the alleged lack of physical damage to the commercial property from the pandemic are grounds to deny the claims.
As a result, businesses across the country trying to cope with pandemic-related shutdowns have been blindsided by the rejected claims. Businesses in the hospitality sector, which are among the hardest hit by the COVID-19 outbreak, have had their revenues whittled down to a small percent of what they would normally take in and staff have been laid off. In many cases, bars, restaurants, and other small businesses have had to close for good. Meanwhile, the U.S. insurance industry sits on reserves approaching $1 trillion.
“The insurance industry foresaw the risk. That’s why they made the move for the virus exclusion,” David Princeton, principal consultant of Advocate Claims Service in Wisconsin and an insurance expert for THIRST, told the Richmond Times-Dispatch. “The insurance industry did nothing to prepare the world for the risk.”
In many cases, policyholders suing their insurers for rejected business interruption claims argue that their policy includes coverage for losses stemming from government-mandated business closures. Some may even argue that business interruption language should be interpreted to mean COVID-19 has a physical presence that causes damage in a way that renders the property unusable.
One insurance expert told the Richmond Times-Dispatch that the language in an insurance policy must be clear. If it’s not, “then the insurance companies would have to pay.”
For now, The Jasper has added a guest chef and offers food for takeout and delivery, including alcoholic drinks. The bar has managed to keep the lights on so far, but dozens of other businesses in the city have been forced to close permanently because of the pandemic.
Business interruption insurance attorneys
Beasley Allen lawyers are actively investigating and filing claims against various insurance companies for denial of business interruption coverage during the COVID-19 pandemic, and are involved in advocating for consolidation of these actions in multidistrict litigation (MDL). Dee Miles, head of our Consumer Fraud & Commercial Litigation Section, Rachel Boyd, and Paul Evans, lawyers in the Section, are spearheading this litigation for our firm and are monitoring all MDL developments as they arise. Please contact them if you have any questions or would like to discuss potential claims.