he world is fighting a battle on health and economic fronts due to the COVID-19 outbreak. The US and many other countries have imposed lockdown to flatten the curve and stop this deadly virus from spreading. However, the closure of offices, companies, and many small businesses like restaurants have made it difficult for business owners to make ends meet.
The only hope for restaurateurs in these unprecedented times is business interruption insurance coverage. But, many insurers are robbing them of their coverage by denying business interruption claims. The good news is more people are calling out insurance companies and extending support for businesses affected by the COVID-19 crisis.
The US Insurance Industry is Feeling the Heat
These are tough times; the insurance sector is turning down the business interruption claims to make things worse. According to the American Property Casualty Insurance Association, small businesses are losing somewhere between $255 billion and $431 billion monthly due to the COVID-19 outbreak.
US President steps-in
This amount is enormous compared to the monthly premiums (approx. $6 billion), the industry charges for property insurance. However, people in power are now stepping in support of the claimants. The US president Donald Trump is amongst the ones calling out insurance companies.
Trump said that it is the legal obligation of insurers to provide coverage for income losses the businesses are facing amid Coronavirus. In a briefing, POTUS claimed that he has spoken with restaurateurs who are paying for business insurance cover for years now. Trump said it is unfair to deny the claims when the businesses need the coverage the most. He said the government “can’t let that happen.”
Restaurateurs create the Business Interruption Group (BIG)
Famous chefs and restaurateurs Wolfgang Puck and Thomas Keller have created a non-profit group with lawyer John Houghtaling. The aim of the Business Interruption Group (BIG) is to help businesses receive payouts. In a statement, the group warned the insurers that they would bring legal action if the insurance companies do not start paying.
Response from the Insurance Industry
Many insurance companies have expressed their concerns, responding to the growing demand for paying COVID-19 related business interruption claims. Evan Greenberg, CEO of Chubb, explained the impact of the increasing pressure on insurers in a recent interview. He said businesses are forcing the companies to pay out for claims on policies that do not include cover for the COVID-19 pandemic. Greenberg believes this pressure or forced claims would destroy or damage the insurance sector terribly.
According to a Reuters report, eight states in the US have passed legislation requiring insurance companies to pay business interruption claims, especially to small businesses (as of April 24, 2020). Most of the bills would help insurers in seeking reimbursement from their respective states.
Federal Class Action Lawsuits against Insurers
Earlier this month, the law firms DiCello Levitt Gutzler, Burns Bowen Bair, The Lanier Law Firm, and Daniels & Tredennick, took Federal Class Action against six insurance companies denying business interruption claims.
On April 14, 2020, the California Department of Insurance (CDI) also issued a press release responding to the complaints against insurance companies, brokers, agents, and other Department licensees rejecting business interruption claims. CDI ordered concerned authorities to conduct a fair investigation of all claims and comply with their legal obligations.