Loading...

Court Ruling Denies Insurance For Restaurants Hit by Pandemic

August 10, 2020 by Tom Ramstack
O'Connell's restaurant and bar, Alexandria, Virginia. (Photo by Dan McCue)

WASHINGTON – A District of Columbia judge’s ruling this week is the latest court judgment that absolves insurers from obligations to cover the losses of businesses during the coronavirus pandemic.

A group of restaurants sued their insurer after the company declined to reimburse them under their business interruption insurance policies.

Business interruption insurance, also known as business income insurance, covers income losses businesses suffer during a disaster. The losses typically result from closings forced by a disaster or because of the need to rebuild.

Washington, D.C., Judge Kelly A. Higashi said the restaurants failed to show how Mayor Muriel Bowser’s shutdown order to prevent the spread of disease represented a “direct physical loss” that Erie Insurance Exchange needed to cover.

In a similar ruling last month, a Michigan judge said coronavirus did not cause a tangible alteration to property that would require insurers to reimburse the owners under property insurance policies.

About 300,000 small businesses have closed permanently because of the pandemic, according to government estimates.

So far, their primary financial backstop has been the Paycheck Protection Program, which refers to government loans designed to provide an incentive for small businesses to keep workers on their payrolls.The Small Business Administration will forgive the loans if all employee retention criteria are met and the funds are used for eligible expenses.

Many restaurateurs say the Paycheck Protection Program provides too little financial backing against the devastation of the pandemic.

In the lawsuit led by Rose’s 1 LLC, which owns and operates several restaurants in the Washington area, the owners argued their losses resulted from more than an “abstract mental phenomenon” that insurers could avoid covering.

“The restaurants have suffered direct physical loss because they have been forced to shut down their normal operations to prevent the spread of a pandemic virus,” the lawsuit says. “That loss falls within the policies’ grant of coverage for income protection.”

Many of the restaurants have continued operating with limited service but found it drives them deeper into debt, according to the plaintiffs. 

“They have also incurred extra expenses to maintain limited operations, including, to the extent possible, carry-out and delivery services, and to take precautionary measures to protect the health and safety of their employees and patrons,” the lawsuit said.

Judge Higashi disagreed the restaurants suffered a “direct physical loss.”

She said the mayor’s shutdown order directed businesses to take specified actions but did not cause a physical change to their properties.

She also said the restaurants could offer no proof the virus was present inside their buildings when they shut down operations in March, which would be required for insurance coverage. Instead, the shutdown was preemptive.

She denied the restaurateurs’ argument that an insurable loss includes “loss of use” because of disease.

Judge Higashi wrote that “even if ‘loss of use’ was covered, plaintiffs would still have to show that the loss of use was a ‘direct physical loss.’”

Rose’s 1 LLC was joined in the lawsuit by nine other Washington-based restaurant companies. Their complaints are similar to restaurant owners nationwide.

“Long-established restaurants that have weathered decades of wars and economic turbulence and massive industry changes are closing their doors permanently because of the pandemic,” Restaurant Business newsletter reported in its latest edition. “Some of these restaurants have been serving food and drink for a century.”

The lawsuit is Rose’s 1 LLC et al. v. Erie Insurance Exchange, Case No. 2020 CA 002424 B, Superior Court of the District of Columbia, Civil Division.

Law

December 7, 2021
by Dan McCue
Select Committee on Jan. 6 Threatens Meadows With Contempt

WASHINGTON — The Select Committee investigating the Jan. 6 attack on the Capitol says it will launch criminal charges on... Read More

WASHINGTON — The Select Committee investigating the Jan. 6 attack on the Capitol says it will launch criminal charges on former White House Chief of Staff Mark Meadows if he refuses to cooperate with the probe. Meadows, who has been an on-again, off-again witness for the... Read More

December 7, 2021
by Dan McCue
Federal Court Blocks Vaccine Mandate for Federal Contractors

SAVANNAH, Ga. — A federal judge in Georgia has blocked the Biden administration from enforcing its vaccine mandate for federal... Read More

SAVANNAH, Ga. — A federal judge in Georgia has blocked the Biden administration from enforcing its vaccine mandate for federal contractors, handing a victory to several state attorneys general who argued the mandate created an unfair economic burden. Presiding in the federal courthouse in historic downtown... Read More

December 6, 2021
by Dan McCue
Congressional Democrats Raised Concerns Over WarnerMedia/Discovery Merger

WASHINGTON — House and Senate Democrats on Monday raised their objections to the pending $43 billion merger of WarnerMedia and... Read More

WASHINGTON — House and Senate Democrats on Monday raised their objections to the pending $43 billion merger of WarnerMedia and Discovery, arguing it will hurt the Hollywood jobs market and squelch diversity in the entertainment workforce. In a letter sent Monday to Attorney General Merrick Garland... Read More

December 6, 2021
by Dan McCue
Treasury Dept to Step Up Scrutiny of Money Laundering in Real Estate Market

WASHINGTON – The Treasury Department is seeking public comment on ways to reduce money laundering and other corruption in the... Read More

WASHINGTON – The Treasury Department is seeking public comment on ways to reduce money laundering and other corruption in the real estate market, part of a larger effort by the Biden administration to curb illicit financial activity as the economy continues to recover from the coronavirus... Read More

December 1, 2021
by Tom Ramstack
Supreme Court Case Hints at Change In Federal Agency Regulation Decisions

WASHINGTON — Conservative judges on the Supreme Court suggested this week during arguments in a multibillion-dollar lawsuit over Medicare drug... Read More

WASHINGTON — Conservative judges on the Supreme Court suggested this week during arguments in a multibillion-dollar lawsuit over Medicare drug reimbursement that now might be the time to overturn a decades-old guiding principle of administrative law. The issue in American Hospital Association v. Becerra is a... Read More

Justices Signal They'll OK New Abortion Limits, May Toss Roe

WASHINGTON (AP) — The Supreme Court’s conservative majority on Wednesday signaled it would uphold Mississippi's 15-week ban on abortion and... Read More

WASHINGTON (AP) — The Supreme Court’s conservative majority on Wednesday signaled it would uphold Mississippi's 15-week ban on abortion and may go much further to overturn the nationwide right to abortion that has existed for nearly 50 years. The fate of the court’s historic 1973 Roe... Read More

News From The Well
Exit mobile version