Many bars and restaurants, debilitated by the COVID-19 crisis, believe their business interruption insurance should cover their losses. Such insurance typically covers establishments when they have to shut down or reduce their operating capacities after suffering physical property loss or damage from disasters like fires or floods. Operators are hoping “global pandemic” will be considered a reason insurance should kick in, even if it’s not explicitly spelled out in policies. Up to this point, insurers have, for the most part, been denying these claims.
While restaurants who have sued their insurers wait to see how their court cases pan out, help could come from another source. On Tuesday, the D.C. Council will discuss its latest installment of COVID-19 emergency legislation. The draft, which began circulating this afternoon, includes language that would compel insurance companies to honor business interruption insurance for their small business clients, including restaurants and bars.
At least seven states, including New Jersey, Pennsylvania, New York, Ohio, Louisiana, Massachusetts, and South Carolina, have introduced similar legislation. Nationwide, nothing has been signed into law yet.
“I’m prepared to pass this,” says Ward 6 Councilmember Charles Allen. He worked with Council Chairman Phil Mendelson, Attorney General Karl Racine, and the Restaurant Association of Metropolitan Washington to draft the language and incorporate it into the proposed bill. “This is big for restaurants, but also other retailers that were shut down.”
Allen’s gut feeling is that Congress is going to bail out big businesses like The Hartford insurance company, not mom-and-pop restaurants. “I’m perfectly fine making sure we do right by our local businesses,” he says. “Our job is to help keep these guys alive.”
The draft “Business Interruption Insurance Amendment Emergency Act of 2020,” which is subject to change by the time the Council convenes on May 5, says: “Every policy of insurance in force in the District that insures against loss of or damage to property and that includes, as of the effective date of this act, coverage for loss of use and occupancy and business interruption, shall be construed to provide coverage for business interruption directly or indirectly resulting from a public health emergency.”
It limits the scope of the mandated coverage to “policies issued to insureds with fewer than 100 full-time employees, each of whom work 25 or more hours per week as of March 1, 2020.”
Insurers largely feel they don’t need to honor business interruption claims related to COVID-19 because of the universally catastrophic scope of the pandemic.
The bill being discussed next week has another lifeline for restaurants in it. As City Paper reported earlier this week, the Council is looking to put a cap on the commission fees third-party food delivery apps like Grubhub, Uber Eats, and Caviar can charge restaurants during the pandemic. According to the draft legislation, the Council is planning cap commission fees at 15 percent. Services that charge more are subject to a fine between $250 to $1,000 per violation. The bill also outlaws delivery apps from reducing driver compensation or garnishing tips, presumably to ensure there are no unintended victims of the legislation.