Restaurant’s COVID-Related Business Interruption Claim Passes in Court

COVID-related business interruption claims are gaining traction in court. What will that mean for insurance in the long-term?
By: | February 5, 2021

A multi-concept restaurant group based in Ohio has seen its day in court — and won.

In yet another business interruption claim filed as a result of the COVID-19 pandemic and its subsequent shutdowns, the Henderson Road Restaurant Systems has been deemed to have a “reasonable claim” despite policy language stating otherwise.

As the coronavirus set in last year, many restaurants, bars, salons, boutiques and more faced mandatory shutdowns to help combat the spread. But during such shutdowns, several institutions, especially small businesses, faced large revenue loss.

Many filed business interruption claims as a result.

However, many soon learned that a typical business interruption claim would not cover the revenue lost during shutdown, because no physical loss to the business had occurred. Insurers denied claims left and right. If a claim found its way to court, the law typically ruled on the side of the insurer.

Henderson Road fought back hard, however. In its argument, it stated that while the policy did exclude coverage for shutdowns forced by microorganisms, it did not exclude coverages for mandatory shutdowns imposed by local and state government.

According to Henderson Road, the main reason behind its shutdown and revenue loss stemmed from government directive and not the coronavirus itself.

It sought compensation for monies lost after Ohio Gov. Mike DeWine ordered restaurants to close in-person dining rooms in mid-March 2020.

Insurer Zurich American Insurance disagreed. It cited the lack of structural damage as grounds for denying the BI claim. But the court saw it differently.

Compelled by Henderson Road’s argument, the U.S. District Court for the Northern District of Ohio ruled in the restaurant’s favor, noting, that physical damage extended to “being disposed of covered property” or being denied its use.

The amount owed was not specified.

Scorecard: Henderson Road is owed business interruption coverage for the COVID-19 shutdown losses it has sustained.

Takeaway: This is not the first COVID-related BI claim to pass. As more and more insureds gain traction, insurers are best served to review policies and see if there are any vulnerabilities that may trigger coverage. &

Autumn Demberger is the content strategist at Risk & Insurance®. She can be reached at [email protected]

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