COVID-19 & Business Interruption: What Restaurant Owners Need to Know

You’d be hard pressed to find a business that hasn’t been impacted by the coronavirus epidemic in one way or another. Some types of businesses, like grocery stores, may have been able to carry on with no loss of revenue. Others may have been able to stay in operation by simply having employees work remotely. But since working from home isn’t an option for restaurant owners, the food service industry is among those most significantly impacted by COVID-19.

California is among several states to have official shelter-in-place orders that placed restrictions on restaurant service. While restaurants were not shut down across the board, the ban on dine-in service meant that many restaurant owners were faced with a very difficult decision: either limit themselves to carry-out and delivery orders or shut down completely until further notice.

With sit-down restaurant service off the table, some of the most iconic restaurants in the Los Angeles area closed their doors indefinitely. But even the ones that have been able to continue with carry-out and delivery orders are often struggling to bring in as much revenue as they need, especially if they typically get a lot of business from tourists and people attending nearby events.

Restaurant Losses & COVID-19

From the time reports about coronavirus first started being covered in the news, the impact on restaurants has steadily grown. As the number of confirmed COVID-19 cases grew in the United States, apps like Instacart saw a surge in popularity as people started focusing on staying home and cooking for themselves. And while some types of restaurants, such as pizzerias and other take-out establishments, may have experienced an increase in business, many dine-in restaurants saw an overall decline in business even before states issued restrictions.

Revenue loss is only one type of loss many California restaurant owners are experiencing right now. They may have lost perishable food that they were unable to use before closing their doors. Very often, landlords and mortgage companies are still expecting to be paid whether the restaurant is open or not. Employees may still need to be paid for time they worked before the closure. Even after a restaurant reopens after a global event like the coronavirus pandemic, they may experience supply chain interruptions that make it difficult for them to obtain supplies they need.

Business Interruption Insurance for Restaurants

Restaurants can find themselves sidelined for a wide range of reasons, including earthquakes, power outages, fires, and severe weather. To help protect themselves from these sorts of events, restaurant owners commonly purchase business interruption coverage as part of their property and casualty/loss insurance policies. 

Business interruption insurance is supposed to help cover lost revenue and many other types of monetary losses caused by temporary closures. Unfortunately, with countless restaurant owners facing losses because of the coronavirus pandemic, insurance carriers have started issuing blanket denials of business interruption insurance claims. 

Insurance carriers have been giving many different reasons for denying business interruption claims related to COVID-19. Since policies often require temporary closures to be caused by some kind of physical property damage, insurers are arguing that a restaurant location wasn’t physically affected by coronavirus or that coronavirus isn’t a type of physical damage. Sometimes, they’ll argue that individual policies don’t cover things like viral pandemics. Even if a restaurant owner purchased an insurance policy that includes civil authority coverage, which is supposed to help if a business is temporarily closed due to a government order, insurers are still frequently denying those claims for similar reasons.

Dealing With Restaurant Business Interruption Claim Denials

If you’ve made a claim for business interruption benefits and have been denied by your carrier, you’re definitely not alone. Even qualified claims have been denied. But as the restaurant industry faces growing losses from the COVID-19 pandemic, and as more and more restaurant owners are having their claims denied, insurance carriers are facing growing pressure to pay these types of claims. Several bar and restaurant owners have filed lawsuits against their insurers and legislators in some states have proposed bills that would require business interruption insurance policies to retroactively cover closures caused by the coronavirus outbreak.

Whether your claim has been denied or you’re getting ready to make a claim, working with a lawyer can help give you the best chance of successfully getting the benefits you’re entitled to. When you pay for business interruption insurance, you shouldn’t have to rely on things like crowdfunding campaigns or other funds being set up to cover what your insurance company is supposed to. At The Wallace Firm, you’ll be able to get help from an lawyer experienced in holding insurance companies accountable. Contact us for a free case evaluation.