Portland chef Carlo Lamagna sat in his empty restaurant and called his insurance broker. He wanted to file a claim, even though he鈥檇 been warned it would likely be denied.
It had been just seven months since Lamagna opened his , . But then, Oregon Gov. Kate Brown closed the state鈥檚 restaurants as she tried to keep the coronavirus pandemic from spreading too quickly and overwhelming hospitals.
鈥淭he filing of the claim, it鈥檚 just 鈥� it鈥檚 not gonna get us anywhere?鈥� Lamagna asked his broker. 鈥淎t all? Zero?鈥�
When an insured business loses income because of fire or storm damage, it may file a claim for lost revenue. That protection 鈥� known as 鈥渂usiness interruption鈥� coverage 鈥� is often included within an insurance policy鈥檚 property coverage.
But as the coronavirus shutters small businesses across the Northwest, business owners are bracing for a wave of insurance denials. That鈥檚 because insurers have been telling businesses that coronavirus losses don鈥檛 count.
On the phone, Lamagna answered a few questions from his broker. No, he wasn鈥檛 doing take-out or delivery, even though the governor left that option open.
鈥淲e鈥檙e completely closed. I mean, we have to do what we can to flatten that curve, try to get it down,鈥� he said.
And then, the hardest question of all.
鈥淚 did,鈥� he said. 鈥淚 laid all of them off.鈥� Nine employees that he considers family.
Business interruption coverage is typically tied to a physical loss at a business, according to Kenton Brine, president of the industry-supported .
鈥淎 fire, a theft, a break-in. A storm that damages the building and forces the business to close,鈥� he said. 鈥淲hat they鈥檙e not designed to cover and what, in almost every case, they specifically exclude, are viruses and bacterial infections.鈥�
After the SARS epidemic, many insurers adopted this exclusion for losses caused by or resulting from any virus or bacteria.
Brine said if insurance was meant to cover epidemics, policies would be vastly more expensive.
鈥淭his is a very hard risk to rate for,鈥� he said. 鈥淵ou don鈥檛 know how widespread an epidemic or pandemic will become. Look what we鈥檙e going through now where we don鈥檛 know how long these emergency orders will be in effect.鈥�
Andy Ricker never thought to scour his insurance policy for a virus exclusion. In the past, the chef-owner of thought more about earthquakes and floods. It took coronavirus to read the fine print.
Ricker filed an insurance claim, but he wasn鈥檛 optimistic.
鈥淚 have zero faith that the insurance companies will do anything except for fight this tooth and nail,鈥� he said.
Last week, Ricker completely closed his restaurants 鈥� no more takeout. Kitchens are close quarters, and he felt he couldn鈥檛 keep his staff safe. 鈥淚 simply cannot bear the thought of one of our team becoming ill for the sake of preparing some chicken wings,鈥� .
He鈥檚 now laid off about 150 people.
鈥淚t鈥檚 devastating,鈥� he said. 鈥淎nybody鈥檚 who鈥檚 worked in a restaurant will understand, it鈥檚 not just a bunch of names on a list. You eat together. You work together. Some people have been with us for years and years and years.鈥�
He said an insurance payment could make the difference between reopening or not. He鈥檚 skeptical that taking on emergency loans will help restaurant owners like him, who already carry substantial debt and need cash.
While the claims process has just begun for businesses hoping to recover coronavirus-related losses, the messaging may be well underway.
鈥淭he insurance industry has effectively attempted to dictate the media narrative on this,鈥� said Mike Farnell, an insurance recovery lawyer with . He represents policyholders when their claims are denied.
His message to businesses: Read your policy.
鈥淒on鈥檛 assume that you don鈥檛 have coverage for COVID-19-related losses,鈥� he said. 鈥淒on鈥檛 take the insurance industry鈥檚 word for it, because obviously they have a stake.鈥�
鈥淪o if every time somebody comes through your retail facility there is a risk that that virus is being deposited on your surfaces, that can be enough to constitute this sort of direct physical loss of or damage to property that we need,鈥� he said.
He said the exercise of civil authority 鈥� for example the governor shutting down many of the state鈥檚 businesses 鈥� may also help ground a business interruption claim.
Despite what business owners might be hearing, not all policies carry a virus exclusion, according to Farnell. And not all virus exclusions are insurmountable.
As for restaurant owner Carlo Lamagna, he ended his call with his insurance broker feeling determined to save his business.
鈥淚鈥檓 gonna fight with my dying breath,鈥� he said. 鈥淚 will. For my own family and for my extended family that is this restaurant.鈥�
Around the country, other businesses against their property insurers for denying coronavirus claims. That means the final word in some of these disputes may come after court battles, possibly long after the pandemic has subsided.
Bryan M. Vance
/The kitchen of Magna Kusina sits empty in Portland, Ore., on Friday, March 27, 2020. Owner and chef Carlo Lamagna laid off his entire staff and closed the restaurant following Oregon Gov. Kate Brown's order to halt dine-in eating at restaurants in response to the coronavirus outbreak.
Copyright 2020
