The lawsuit, which was filed in federal court in Boston, said that Legal’s policy doesn’t contain a pandemic exclusion, which insurers have been writing into some business interruption contracts since the SARS outbreak in 2003. Legal said it signed the policy on March 1, by which time it was widely known that the coronavirus was spreading globally.
“They certainly would have known about it,” said Roger Berkowitz, chief executive of Legal, which has 34 restaurants in Massachusetts, New Jersey, Pennsylvania, Rhode Island, Virginia, and the District of Columbia.
Without a pandemic exclusion, “a reasonable and prudent business person like Roger would infer that the policy would cover these losses,” said Harry Manion, a Boston-based partner at Hunton Andrews Kurth, who is representing Legal.
Officials for Strathmore , a subsidiary of Greater New York Mutual Insurance Co., could not immediately be reached for comment.
Berkowitz, whose family opened its first restaurant in 1968, is the highest-profile restaurateur in Massachusetts to fight for payment of coronavirus insurance claims. The food and lodging sectors have been devastated by the shutdowns, with more than a third of workers in Massachusetts filing for unemployment pay in the past six weeks.
“I’m glad Roger is bringing attention to this problem,” said Tony Maws, owner of Craigie on Main and one of the organizers of Mass Restaurants United, a network of area restaurant owners advocating for relief measures on the local, state, and federal level.
The group has made business interruption insurance one of its signature issues, supporting proposed legislation on Beacon Hill that would require insurers to cover losses from the pandemic. If the legislation passes, insurers would pay out claims related to the shutdown, and then later be reimbursed by the state using an emergency fund created for the purpose.
A range of businesses are pushing back on rejected coronavirus claims, and insurers grew concerned enough to begin lobbying lawmakers in Washington to create a fund to cover losses. Insurance companies say business interruption insurance is designed not for global pandemics, but for situations such as fires and natural disasters that physically affect a workplace.
Last month, President Trump appeared to take the side of businesses, saying pandemic claims should be honored unless their policies contain an exclusion.
“When they finally need it, the insurance companies say we are not going to give it,” Trump said of policyholders. “We cannot let that happen.”
Bob Luz, head of the Massachusetts Restaurant Association, said that Legal’s lawsuit was one of many filed nationally by big-name restaurateurs.
“It’s not the first one nor will it be the last,” Luz said.
Thomas Keller and Wolfgang Puck are among the high-profile chefs nationally who have filed lawsuits against their insurers, and they are members of the recently formed Business Interruption Group, which is advocating for insurers to pay out their interruption claims. The two chefs were also named to Trump’s council for economic revival efforts.
Legal filed its claim with Strathmore on March 23, according to the lawsuit, less than a week after Governor Charlie Baker ordered restaurants to end sit-down service, one of a series of restrictions on businesses aimed at halting the spread of the virus. Strathmore denied the claim three days later.
“This does not constitute physical loss of or damage to either covered property at the described premises or damage to any property in the surrounding area which would limit access to the insured location(s)," the insurer’s rejection letter stated.
Legal asked the insurer to reconsider. Strathmore did, but again denied the claim.
Berkowitz said Legal had not calculated the loss it is asking Strathmore to cover. The chain has furloughed 3,100 employees, most of its workforce. It decided against offering takeout service because it didn’t want to put its workers in danger of infection, according to Berkowitz.
He said the insurance money would help Legal pay its staff and vendors, including fishermen, and a win against Strathmore might help other businesses receive payouts.
“The restaurant business is a cash flow business,” he said. “You can’t pay people when you aren’t open. If this provides a road map for others, that would be a good thing."