Coronavirus insurance coverage fight leads restaurants to threaten legal action

President Trump made arguments in favor of the restaurateurs at the White House last week

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The restaurant industry – which has been hit particularly hard by measures aimed at stemming the spread of coronavirus – is taking on insurers, demanding coverage under policies they have been paying into for years.

A new “Business Interruption Group” formed by notable names in the industry, including Thomas Keller, Wolfgang Puck and Daniel Boulud, says insurance companies are “wrongfully denying business interruption insurance coverage” for businesses around the country. They seek federal subsidies for insurers that pay out the coverage based on coronavirus-related losses.

The argument has made its way to the White House, as well.

“You have people that have never asked for business interruption insurance, and they’ve been paying a lot of money for a lot of years for the privilege of having it, and then when they finally need it the insurance company says ‘we’re not going to give it,’” President Trump said during a press conference at the White House last week. “We can’t let that happen.”

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Puck made similar comments in an interview with FOX Business earlier this month.

“All the smaller retailers, like 30 million people, paid the insurance over so many years and [insurers] now refuse to pay business interruption,” Puck said. “And for us, that's really an important part … if they would pay up and own up to their commitment.”

Business interruption insurance typically doesn’t cover communicable diseases, pertaining instead to disruptions attributable to physical damage – like a fire, flooding or vandalism.

Oftentimes these policies don’t mention pandemics, though sometimes they include it as an exclusion.

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The Business Interruption Group is promising legal action, however, in “every state against insurers who deny funds for civil authority coverage.”

“Immediate payment is due on policies that do not contain a virus exclusion,” John Houghtaling, the group’s general counsel, said in a statement.

The president also indicated support for insurers paying up.

“I would like to see the insurance companies pay what they need to pay, if it’s fair,” Trump said.

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Employment in leisure and hospitality fell by 459,000 in March, according to data from the Bureau of Labor Statistics, mainly in food services and drinking places. That drop accounted for roughly two-thirds of the 701,000 total decline in jobs. Restaurants have been forced to close their doors to customers in most states under coronavirus-related guidelines.

As previously reported by FOX Business, there are options for coverage – including something known as epidemic insurance – but it is not a very common product.

Many companies take out cancellation insurance for an event or have business interruption insurance. Even individuals hosting large weddings may opt to take out cancelation insurance, which would typically cover something like a weather event.

However, after the SARS and MERS outbreaks earlier this century, InsuranceQuotes analyst Erik Josowitz told FOX Business a lot of companies revamped their cancelation policies to exclude communicable diseases. That means companies are not covered unless they purchased a specific policy.

Traditionally, epidemic insurance policies have been rare – and therefore more expensive, which is why companies don’t typically purchase them.

But if they become more common – and as these communicable disease events increase in frequency – price points may become more accessible.

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