What Restaurant Business Insurance May (Or May Not) Cover During a Pandemic

Restaurants throughout the world have been forced to close as a result of the city and statewide coronavirus-related lockdown laws, and many company owners have been left questioning whether their public liability insurance policy covers their business against pandemics of this nature.

While there is unlikely to be a specific pandemic clause (or exception) in any restaurant’s insurance policy, owners are expecting help in the event of a worldwide health emergency that may lead to economic disaster.

There have been many cases of restaurant owners taking legal action seeking a judgment from their insurer to reimburse damages suffered while their restaurants were forced to close due to government lockdowns during the spread of COVID-19. Restaurants that have filed lawsuits in this regard have done so on the basis that their insurance policy covers “direct physical loss” from outside factors, such as “the event of the enterprise being closed by order of Civil Authority.”

If you’re a restaurant owner who has been affected by the pandemic, it’s likely that you have multiple insurance-related queries about COVID-19 pandemic insurance claims. Here are some of the most common questions we encounter:

What kind of insurance would cover a company loss caused by COVID-19?

Lawyers argue that business interruption insurance, also known as income interruption insurance, is the most important form of insurance restaurant owners need to be aware of. Business interruption insurance, as the name implies, provides your company with coverage for any disruptions that require you to temporarily close your doors. Fires, weather disasters, and other unforeseen events are usually covered by this policy. Not commonly included in these insurance policies? Pandemics.

It is highly likely that international pandemics will be specifically excluded from the next generation of insurance contracts. However, for policies that were already in place prior to the most recent pandemic, there are considerable arguments to support that a restaurant should be covered for losses caused by COVID-19. It will all come down to the wording in your policy.

What are the conditions for filing a claim for business interruption?

The disadvantage of using business interruption insurance is that most of these policies require tangible property loss or damage in order to be paid out. However, when it comes to the COVID-19 pandemic, even if a restaurant’s property is not physically damaged as a result of a fire, flood, or other natural disasters, it may still be covered under physical loss.

Restaurants may be able to meet the direct physical loss criteria in some cases if they were forced to close and had no access to their restaurant. The situation will be different if the business remained open to serve takeout because, essentially, it did not shut down; it just made less money.

What features should I look for in an insurance policy?                                                        

In the text of your insurance policy, there are a few keywords and phrases to keep an eye out for. Restaurant owners should inquire about these sorts of insurance coverage with their insurance brokers and lawyers.

Crisis Management Coverage provides you with insurance cover for crises. Such crises may include a violent act, such as a robbery, as well as a restaurant being shut down for food contamination or communicable disease.

Contingent Business Interruption Insurance is a sort of business interruption insurance that covers indirect losses caused by “a supplier’s inability to perform his/her obligations with the insured (business owner) owing to no fault of his own.” This form of insurance might cover a government lockdown of a whole city or state.

When your business is disrupted by a federal, state, or local government mandate, you have civil authority coverage.

Impossibility of Performance and Frustration of Purpose occurs when a company is unable to “fulfill a contractual duty” due to circumstances they could not have predicted.

What are my chances of my insurance company covering coronavirus?

Unfortunately, because no one, including insurance companies, could have imagined the scope of a global pandemic, there is unlikely to be explicit language in commercial insurance policies relating to COVID-19.

As a result, insurance companies have a lot of discretion in claiming exclusions, and business attorneys have a lot of leeway in finding loopholes in that imprecise language for restaurants to exploit.

It is highly likely that insurance will take every effort to avoid paying out on claims. Essentially, their restaurant insurance plans were not designed to cover global health crises like this, and their argument is likely to be that it is the government that should compensate businesses.

What is the definition of viral exclusion?

Although most insurance policies do not mention pandemics expressly, they may contain a viral exclusion policy. Clauses related to viral exclusions were introduced after the SARS crisis a decade ago. These are frequently referred to as pathogenic organism exclusions, and they include bacteria, yeast, mildew, and viruses.

Even though virus exclusions are frequent, depending on the phrasing of the contract, there is a chance that these exceptions could be easily circumvented.

Is the “Act of God” argument applicable to my restaurant?

It’s unclear if the “Act of God” defence, sometimes known as “Force Majeure,” would apply in the COVID-19. Natural catastrophes such as deluges, fires, earthquakes, and other natural disasters, as well as businesses harmed by the 9/11 attacks, are widely considered “Acts of God.”

The Act of God clause, however, is more intricate than it appears.

It is highly unlikely that a virus would be protected under an Act of God argument; however, there could be exceptions if a restaurant owner acquired the infection and/or died.

Are there any eateries that are more likely to be covered than others?

Lockdown orders require restaurants to close their dining rooms but do not oblige them to stop offering takeaway or delivery.

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Some high-end restaurants were not practically able to offer takeout. In such cases, the restaurant or bar may have a case for claiming loss of property due to the inability to provide takeout.

What action do I need to take to file a claim with my insurance company?

If your restaurant is forced to close temporarily, it is highly recommended that you meticulously document everything. Do not rely solely on your insurance broker’s word, and contact a lawyer as quickly as possible.