Insurance companies will take your payments. Month after month. Year after year.
But when you need to file a claim to recover what was lost, that’s when they tell you that what caused your loss was never covered.
And so it goes for businesses seeking to recover revenue lost because of the COVID-19 shutdowns ordered by state and local governments last spring.
Across the U.S., courts so far have sided mostly with insurers after businesses claimed the pandemic interrupted their business and insurance should cover it. But thousands of cases are still pending, including dozens in South Florida, and a single judge’s ruling in a case in Missouri have given businesses confidence that there might be a way to force insurers to pay up.
The Restaurant People of Fort Lauderdale, owners of 14 South Florida restaurants, are among companies with pending claims. Co-owner Tim Petrillo said the company lost 98% of its revenue during the six weeks its restaurants were forced to close their dining rooms between late March and early May. While the state’s shutdown order allowed restaurants to remain open for takeout and delivery, that was feasible for only six of the 14 restaurants, he said.
The company, recovering since dining rooms were allowed to reopen, decided to sue after their insurers said their policies excluded losses due to viruses and pandemics, he said.
“When they’re selling the insurance, they say, ‘This takes care of everything,’” Petrillo said. “You pay these huge premiums all your life and then find out they’ve carved out everything they can think of not to cover.”
Early in the pandemic, insurance industry leaders sought to dissuade businesses from filing claims for revenue lost to the quarantine. Evan Greenberg, CEO of Chubb Limited, one of the world’s largest insurers, went on CNBC in April and announced his company had no intention of paying claims if policies did not expressly state that viruses and pandemics were covered.
The American Property Casualty Insurance Association estimated that government closures have cost businesses $255 billion to $431 billion a month, far exceeding the ability of insurers to pay.
Since then, the industry has reinforced its message by boasting about nearly every court ruling that has gone its way. “Another court agrees: Business Interruption Insurance Does Not Cover Pandemic-Related Losses,” said the subject line of an email release by the Insurance Information Institute, a trade group created by the industry to educate consumers about insurance-related issues.
Its message to businesses is clear: Filing a pandemic-related business interruption suit would be a waste of your time, energy and money.
Businesses with pending claims disagree. Their attorneys are studying rulings in unsuccessful early cases in hopes of developing arguments that judges can’t deny.
More than 100 Florida businesses have claims pending in state circuit courts and federal courts, according to a database of COVID-19-related complaints maintained by the law firm Hunton Andrews Kurth.
Among them are numerous well-known restaurants and attractions and lesser-known medical practices and manufacturers.
The Restaurant People’s suit is seeking lost revenue for its restaurants, which each had separate insurance policies. So far, Broward County Circuit Court records show a single lawsuit filed Sept. 9 on behalf of S3 Restaurant against insurers Ironshore Europe DAC and Lloyds of London.
Southport Raw Bar and Restaurant, a popular eatery south of the Fort Lauderdale-Hollywood International Airport, sued Lloyds of London in Broward County Circuit Court on July 30.
Anthony’s Runway 84 sued Lloyds of London in federal court in Fort Lauderdale on June 12.
Other restaurant plaintiffs are IT! Italy Ristorante & Cafe & Bar on East Las Olas Boulevard in Fort Lauderdale, El Novillo Restaurant in Miami and AE Management LLC, which is seeking lost revenue for its group of restaurants including Casa D’Angelo Ristorante in Fort Lauderdale and Boca Raton, and Angelo Elia Pizza Bar Tapas in Fort Lauderdale, Weston, Delray Beach and Coral Springs.
Other types of businesses suing their insurers include Magic City Casino in Miami, The Actor’s Playhouse in Coral Gables, Atma Beauty Salon in Miami Beach, and Website Man Productions in Boynton Beach.
Franco’s Cocktail Mixes, a longtime Pompano Beach-based manufacturer of such bar drink blends as Cyclone Cocktail Mix, Hurricane Cocktail Mix and Lime Margarita Mix, said in its suit against Mitsui Sumitomo Insurance Company of America that it was forced to shut down its operation when restaurants and bars it supplies were forced to close.
The business said its “all-risk commercial output income insurance policy” is supposed to cover loss of business earnings plus other expenses stemming from “actions of civil authority,” including shutdown orders.
“For years and even decades, the vast majority of people and businesses that carry business interruption insurance have faithfully paid their premiums and never made a claim,” Franco’s complaint states. “Now that there is a catastrophic business interruption caused by a national health pandemic and government-ordered shutdowns, their claims are denied.”
Lawsuits so far have advanced a handful of arguments. Some suits, like Franco’s, say they were covered for shutdowns caused by “actions of civil authority.”
Others say their “all perils” policies cover losses from viruses or pandemics unless their policies specifically exclude them.
Attorney Steve Marks of the firm Podhurst Orseck P.A., who represents IT! Italy Ristorante & Cafe & Bar and several other Florida clients, says that insurers created policies after the Ebola and SARS pandemics in the early 2000s that specifically excluded viruses and pandemics. But they continued to sell higher-priced “all perils” policies without that language and therefore policies without the specific exclusions should be required to cover viruses and pandemics, he said.
“Why would you have two policies if they intended to say the same thing?” he said.
Insurers, however, argue that policies cover only what they say they cover.
Many of the suits claimed that coverage for “direct physical loss or damage to property” was triggered by shutdowns ordered by civil authorities. In other words, the shutdown orders caused the business owners to suffer a “direct physical loss” of the use of their properties.
So far, judges have rejected that argument and dismissed — before they can advance to a jury trial — all but one of the cases that have been argued in their courts, said Hollywood attorney Michael Cassel, whose firm represents Southport Raw Bar and Anthony’s Runway 84 in their lost revenue claims.
And it’s the one exception that has given business owners hope for a way forward.
In Missouri, a federal judge rejected Cincinnati Insurance Co.’s motion to dismiss a hair salon’s claim that physical damage to its property was caused by the presence of the virus itself. The judge on Aug. 12 ruled that COVID-19 particles were a “physical substance” that attached to and damaged property.
Siding with an insurer in a local case last month, a federal magistrate in Miami pointed to that ruling as a possible legal path for other businesses to follow.
“That seems to be what’s necessary to go forward to at least survive into the [next] stage,” Cassel said.
Marks said he envisions businesses with pending claims will amend their lawsuits and argue that the virus directly caused damage to their properties. “When you have 5% positivity rates [for the virus] and thousands of people are visiting your premises, it’s virtually certain that the virus got on surfaces,” he said.
Mark Friedlander, spokesman for the Insurance Information Institute, called the ruling “an outlier” and said it was “only a procedural ruling not to dismiss the case.”
“We are confident insurers will continue to prevail in similar lawsuits that have been filed in Florida and across the U.S.,” he said.