As the national effort ramps up to arrest the spread of COVID-19, the infamous coronavirus, many small businesses are facing tough times. The government has recommended restricting gatherings to fewer than 10 people and urged restaurants and the like not to serve food on the premises, but only to do so through take-out or delivery. State and local governments have enforced this on a smaller level, with some states like California all but confining people to their homes.
Obviously, this means that restaurants and other small businesses are not seeing the same revenue they normally would, and are in serious financial shape. Many who were relying on their business interruption insurance are finding that most policies do not cover bacterial or viral infections. This has left enormous swathes of the country financially vulnerable. Not everyone is taking it without a fight.
New Orleans Lawsuit
In New Orleans, the first significant lawsuit to secure payment on a business insurance policy for the coronavirus is underway. A restaurant, the Oceana Grill, is suing their insurance company for payment, because the civil authorities ordered the shutdown. The Louisiana governor banned gatherings of 250 people or more, and the mayor of New Orleans restricted the hours restaurants can remain open with service to fifty percent of capacity.
The plaintiff also claims that there is no specific exclusion in their policy for pandemics or infections. They claim the insurer ought to pay because of the mandated shutdown and is not taking the infection exclusion as an acceptable answer. It is very unlikely that this will be the only such case.
New Jersey Legislation
Meanwhile, in New Jersey, the state legislature is trying to pressure insurance companies to be part of the solution – or be compelled to pay anyway. This bill would cover small businesses that have 100 employees or less, working 25 hours a week, requiring that policies be paid out, regardless of exclusions. This has of course caused a panic in the New Jersey insurance world, warning of the devastation that this would bring to the industry.
The legislature has delayed the bill for a time to allow the industry to come up with another solution, hoping that they will be a part of a multifaceted solution. Other states and insurance markets doubtless have their eye on this case.
What Comes Next?
If the outbreak continues to persist and the quarantines increase, insurance companies will only face more pressure from the public. While the government works on relief packages for businesses and families, many feel that the insurance industry ought to help in some way. This is exactly the kind of crisis these exclusions were meant to avoid, but insurers may not have a choice.
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