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Two D.C. bartenders are joining the battle to compel insurance companies to pay out business interruption claims to bars and restaurants desperate for a lifeline five months into the pandemic.Zac Hoffman of Cafe Fili and Megan Barnes of The Brighton signed on as the local volunteer leads of a national advocacy coalition founded in April called Thirst Group.
Business interruption 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. Up to this point, insurers have, for the most part, been denying these claims. In response, a growing number of bar and restaurant owners are taking their insurers to court, hoping to convince judges that they’re entitled to payouts. They do, after all, pay premiums in case disaster strikes.
Much hangs on the words “loss” and “damage” and whether or not they can be applied to a global pandemic that for several months mandated that bars and restaurants close to on-premise consumption.
Aaron Silvermanof Rose’s Restaurant Group, Matt Baker of Gravitas, Tiffany MacIsaac of Buttercream Bakeshop, José Andrés of ThinkFoodGroup, Fabio Trabocchi of Fabio Trabocchi restaurants, and Robert Wiedmaier of RW Restaurant Group are among those who have sued. So far there have been mixed results locally and nationally. Earlier this month, a D.C. Superior Court judge sided with an insurer, ruling that the restaurants’ insurance policy shouldn’t kick in because there was “no direct physical loss.”
Thirst Group brings a legislative approach to the fight. “The goal is to get a legislative item passed that essentially clarifies some ambiguities surrounding policies and claims so that bars and restaurants can get their claims paid out,” Hoffman says. He also serves as the executive vice president of the DC Bar and Restaurant Workers Alliance and is running for an ANC seat in Ward 5.
“We have a great bar community here,” Barnes adds. “We’re trying to change the game a little bit.”
The D.C. Council took a look at passing such legislation back in May. Ward 6 Councilmember Charles Allen told City Paper at the time that 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 proposed emergency legislation. “I’m perfectly fine making sure we do right by our local businesses,” Allen said in May. “Our job is to help keep these guys alive.”
The provision stated insurers cannot deny a claim for “loss of use and occupancy” created by the city’s order declaring a public health emergency in early March, even if there isn’t physical loss or physical damage to a business’s property. The proposed mandate was limited to businesses with fewer than 50 employees and less than $2.5 million in annual sales and only required insurers to pay 50 percent of losses.
But when it came time to pass the emergency legislation, the Council yanked it. Ward 5 Councilmember Kenyan McDuffie, Ward 3 Councilmember Mary M. Cheh, and At-Large Councilmember David Grosso were the most vocal in their opposition.
“I don’t see why we would insert ourselves in this situation when there are already court cases out there trying to work this through,” Grosso said. “We’re short-circuiting those court cases, which isn’t an appropriate legislative role.”
“While we’d have a good argument, it’s not a slam dunk and the insurance companies would have a good argument,” Cheh pointed out.
Getting legislation similar to what Allen initially proposed on the legislative agenda for the fall is the local arm of Thirst Group’s goal. Hoffman and Barnes will spend the next few months gathering buy-in from the community. They’re looking for people to join them.
“Back in May there was not an environment where we could effectively organize around an issue and fully discuss it,” Hoffman says. “There wasn’t enough time to gather community support. This time around we’re confident we’ll have the support of the industry and potentially the community at large.”
For Hoffman and Barnes, getting involved in activism is about saving jobs. “Every time a restaurant or bar closes permanently, there are 20, 30, or 40 jobs that aren’t going to come back for people counting on them,” Hoffman says. “And if we let these businesses close, we’re going to be further and further in the hole when it comes to do the budget next year.” D.C. CFO Jeffrey DeWitt reported early on in the pandemic that the hospitality industry accounts for almost half of they city’s $1.6 billion in sales tax revenue.
Nate Whitehouse founded Thirst Group in April. By day he runs Drifter Spirits, but he’s also an attorney. When the pandemic hit, he started doing pro bono work for friends in the hospitality industry. “We tried to put together this rallying cry and really plug in a lot of different people with expertise and now we’re in about 20 states,” he says. “The goal is to rattle some cages and make some noise.”
Whitehouse reports that so far about 10 states have introduced bills addressing business interruption insurance. But he also hopes restaurants and bars will continue trying their luck in the courts. “There has to be a multi-pronged approach,” he says. “Fundamentally it’s about getting insurance companies to the table to find a solution.”
The 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. Sean Kevelighan, CEO of the Insurance Information Institute, told the Postthat if lawmakers require carriers to pay these claims, it could cost the insurance industry $150 billion a month, which would quickly deplete its $800 billion surplus.
There’s much at stake for the hospitality industry too as other forms of aid have dried up. “This is the last line of defense for saving America’s bar and restaurant community and I don’t think I’m being overdramatic,” Whitehouse says. Though he’s seen higher estimates, he’s convinced about 40 percent of small independent hospitality businesses won’t make it. And he sees the restaurant industry’s greatest strength as being a place where anyone can find a job. “It’s a lot of people’s insurance policy,” he says.