COVID-19 Dims the Lights on California’s Nightclubs

Los Angeles has a very long history of being home to some of the best nightlife in the country. Back in the golden age of Hollywood, nightclubs like the Cocoanut Grove and Ciro’s were world-famous hangouts for some of the biggest movie stars of all time. In the 1960s and 1970s, clubs like the Whisky a Go Go and the Roxy turned the Sunset Strip into an important part of the music scene and remain popular venues to this day. Often, when tourists come to Los Angeles, they want to check out at least one of the city’s famed nightclubs while they’re in town.

But as the coronavirus pandemic hit the United States and several states ordered all non-essential businesses to close, nightclubs were among those hardest hit by mandated closures. In more typical times, the bar and nightclub industry nationwide generates about $24 billion annually. But because of the ongoing effects of the coronavirus pandemic, IBISWorld estimates that the bar and nightclub industry is projected to decline 9% in 2020. 

What COVID Meant for Nightclub Owners

Nightclubs depend on being able to welcome crowds of people, whether it’s to spend a night on the dancefloor or to enjoy some live entertainment. But the nature of nightclubs means that they will likely be among the last businesses allowed to reopen and owners have limited options to keep business going in the meantime. 

While some bars and restaurants have been able to make the switch to offering carry-out or delivery of food orders, many nightclubs aren’t set up to serve food. In March, restrictions on alcohol delivery in California were modified to allow to-go orders of cocktails, but only if purchased along with food from the same business.

When people think about spending a night on the town, they often imagine doing so with a drink in their hand. Drink sales are a very important source of revenue for nightclubs. For people who want the full VIP experience when they’re out at the club, many Los Angeles nightclubs offer bottle service. With the exclusive treatment bottle service customers receive, it’s a luxury service nightclubs can easily charge hundreds, if not thousands, of dollars for and isn’t something that can’t easily be translated into an at-home version. 

With nightclubs being unable to operate as they normally would, some club owners have started trying to do what many other types of businesses have been doing: moving events online. In some cases, club owners have been able to host virtual parties through video conferencing software, complete with cover charges, dress codes, and live DJs being streamed to attendees. However, going virtual comes with its own overhead, like the costs of things like hiring a videographer, buying video equipment, working with a promoter, and hiring DJs or other entertainers.

Given that so many nightclubs are also music venues, those clubs have seen substantial losses from the large number of cancelled concerts and other types of events. When the shutdowns first began in March 2020, many people were optimistic that events like concerts would be able to resume in late summer or in the fall. But as time progressed, it became clear that venues would be looking at events being cancelled for the rest of 2020. Even once nightclubs are able to reopen, there’s also a chance that it could take some time before people are comfortable with the idea of spending a night in the club again. 

What Nightclub Owners Should Know About Business Interruption Insurance

Running a nightclub comes with a lot of unique needs when it comes to business insurance. Not only do you need things like general liability coverage, liquor liability coverage, workers compensation, and insurance to protect your building and its contents, clubs may need other types of coverage if they have bouncers, offer valet parking services, or host concerts and other events. Very often, nightclub owners have insurance that includes business interruption and/or civil authority coverage.

If a business is forced to close temporarily, business interruption insurance can be used to help cover ongoing expenses and monetary losses associated with that closure. It can cover things like lost revenue, employee payroll, tax payments, utility bills, loan payments, and rent/mortgage payments. Most commonly, it’s used after something like a storm, fire, or flood damages a building. Civil authority coverage is similar to business interruption insurance, but specifically applies if a business is forced to close because of a government order. 

But with the coronavirus pandemic impacting businesses in so many different industries, insurance carriers have been doing everything they can to deny as many business interruption and civil authority coverage claims. Sometimes, these claims are being denied without being properly reviewed first. Many business owners have reported that their insurance companies have discouraged them from even trying to make a claim. 

Help With California Business Interruption Claims

Business interruption insurance is supposed to protect business owners from the unexpected. But just when business owners need these insurance benefits the most, insurers are turning their backs on policyholders. Many business owners have already filed lawsuits over these denied claims. 

The Wallace Firm is now working with California business owners to help them with their business interruption claims. Whether you’ve already made a claim and been denied or are still getting ready to make your claim, we can help give you the best chance of success. Our team has a track record of taking on big insurance companies and holding them accountable so that people are able to get the benefits they need. Contact us today for a free case evaluation.