Restaurants and bars in Houston enjoyed only a brief reopening following early closures to prevent the spread of COVID-19. But as cases continue to rise in Texas and several other cities across the country, restaurants in Houston have been forced to return to 50% capacity and bars have been ordered to close again. While the Paycheck Protection Program (PPP) offered some relief, many small and midsize restaurants and bars are struggling. The second wave of closures is only making matters worse.
When disasters strike, forcing businesses to temporarily close, they can usually fall back on their business interruption insurance. It’s part of a business owner’s policy that provides coverage for operating expenses such as bills and payroll in the event a disaster, like a tornado or hurricane, forces the business to temporarily close.
Restaurants, bars, and other businesses that have suffered from COVID-19-related closures have turned to their insurers for help only to be told the insurance they’ve been paying for month after month, year after year, does not cover closures due to viruses.
“There’s a crisis in the restaurant, bar and hospitality industry. There are many different facets to this issue, but one of the key parts to it is the requirement—for valid and great public health reasons—for shutdowns. It has left a lot of people on the brink of insolvency,” Nate Whitehouse, national organizer for Thirst Group, which stands for The Hospitality Industry Re-Imagined Security Trust, told the Houston Food Finder.
One such neighborhood bar, Nickel City, was seeing year-over-year increases in revenue before the disaster hit and the state began mandating closures. “Then it was like a faucet was turned off,” said owner Travis Tober. “It’s a tough situation, especially for bars and restaurants. We’re being labeled as the most dangerous activity.”
The insurance industry, however, is refusing to lend a hand, instead putting the responsibility on the federal government’s back. Insurance Information Institute CEO Sean Kevelighan said in a statement, “The federal government is the only entity with the financial resources available to help businesses impacted by the government-mandated quarantines.”
Many businesses in the restaurant industry are not taking no for an answer, filing lawsuits against their insurers for breach of contract.
Beasley Allen lawyers are actively investigating and filing similar 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 an 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.