Business Interruption Insurance For Restaurants: Are COVID-19 Losses Covered?

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The 2020 COVID-19 Pandemic has hit businesses hard.  It reminds me of other times in my career where companies were faced with extreme losses and needed help from many sources.

In 2010 with the Gulf Coast Oil Spill, business sales dropped drastically for over 5 months. More recently in 2017 in Atlanta, Georgia, the collapse of the I-85 bridge collapse negatively impacted those businesses surrounding the area for months. Another example is when a fire burns down a kitchen in a restaurant, sales drastically drop for that business.

All of these examples bring me to the question of business interruption insurance. Since the recent Small Business Administration disaster loans are designed to keep paying payroll for employees and help small businesses with rent, utilities, and mortgage interest, they don’t cover COVID-19 business losses.

Even with the move to delivery and takeout business, our restaurant clients who have had to discontinue dine-in business are seeing only a fraction of their pre-COVID sales. Even the CARES Act loan programs aren’t enough to help most independent restauranteurs recover company losses. Many restaurants are still at high risk of going out of business which is why the question surrounding business interruption policies has surfaced. Some restaurant operators are challenging the insurance industry’s refusal to pay business interruption claims for losses due to the pandemic.

While not all independent restaurant owners carry business interruption insurance; however, for the ones that do, they might ask how it might benefit them right now. In the past with our clients, we had to demonstrate what the business would have looked like without the bridge collapse.  Then, it was up to the attorneys to determine if the business interruption policy should cover the losses.

We advise looking into the argument on whether the insurer should cover the claim. With the celebrity chefs taking on the insurers and forming a “Business Interruption Group”, now is the time to do it. The best place to start is by filing a claim. If the insurer approves the claim, expect a fair amount of effort ahead to determine the value of the loss.

This is where we can help. Any potential cash flow to get restaurants through this crisis is worth pursuing.  

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