“Post pandemic, many changes and questions will likely emerge moving forward,” said Michael Giusti, insuranceQuotes.com analyst and author of the report. “For one, no insurance policy is likely to offer pandemic or infectious disease coverage any time soon. Another question mark is whether states, regulators, and local jurisdictions will step in and try to force insurers to pay for things that they thought were excluded in their policy language.”
Below, we take a look at the parts of the report that affect the bar/restaurant industry, including unemployment, business, and restaurant insurance.
Restaurants have some specific coverages built into their insurance policies. While a real estate agent will be mostly concerned with automotive coverage and professional liability coverage, a fast food franchise will most likely be more concerned with spoilage and liabilities arising from their deep fryers.
And while a restaurant’s business owner’s policies, workers’ compensation policies, and general liability policies are well tailored to their risks, they don’t likely provide any coverage from losses due to a pandemic closing them down.
That is because, much like other types of business interruption insurance, a restaurant’s business interruption coverage is likely tied to their property/casualty policy, meaning if a fire shut down the business, they’d likely be covered for lost income until they reopened. But since it was a germ that caused the shutdown and no physical damage ensued, they may be out of luck.
But restaurants have vast stores of food that don’t get better with age. And because spoiled meat and stale beer can’t be sold later, many are arguing that the shutdowns are causing actual damage to their businesses.
Through this logic, some restaurants are suing their insurers to force them to cover COVID-19 as a covered event under business interruption insurance, but none of those suits have made their way through the courts yet.
In some very rare cases, restaurants might be covered if they have a “contingent business interruption insurance policy” in place. Those are designed to cover a business if they can’t operate because a supplier is no longer able to provide them with those key things they need in order to do business. So, say a city is under a stay-at-home order, some lawyers are arguing that this type of rider may kick in, for example, if a meat supplier can’t make their regular deliveries.
Other possibilities include “civil authority coverage” riders and “impossibility of performance or frustration of purpose” riders. Just as they sound, they kick in when things beyond the restaurant’s control keep them from conducting business, though most policies don’t often include such language.
With unemployment driven by government-manded shutdown orders hitting record numbers in all corners of the country, the federal government has stepped in with some changes to the unemployment insurance backstop to help people who are finding themselves, in many cases for the first time, without a job.
Congress passed the Coronavirus Aid, Relief and Economic Security Act (CARES Act), which ushered in many changes, not the least of which is an overhaul to the unemployment insurance system.
Unemployment insurance is a joint state-federal program. Unemployment is funded through fees paid by employers based on how many employees they have on payroll and how much each of those employees earn.
The more someone earns before losing their job through no fault of their own, the more they will be eligible to get in weekly unemployment benefits — up to a state maximum. What the CARES Act did was add a $600-per-week bonus on top of what someone would otherwise be eligible to earn. So, say a worker in Oklahoma was eligible for the maximum $520-per-week payment. After the CARES Act subsidy, their unemployment benefit would more than double to $1,120 per week.
The CARES Act also extended the maximum number of weeks someone is eligible for benefits to 39 weeks – a full 13 weeks longer than most states’ benefits.
Traditionally unemployment was a program that was only available to W-2 employees – or rather people who are on a full-time payroll at a company. That left out self-employed people and so-called gig workers. The CARES Act changed that and made them eligible for unemployment benefits as well.
Businesses need insurance. Otherwise, their liability would be unimaginable. But in the wake of the COVID-19 pandemic, many businesses realized their coverage may not protect them from some of the things they thought it did, and in many cases, the policies had carveouts in unexpected areas.
The first policy most businesses look to when they can no longer perform their primary function is business interruption insurance. That makes sense because their businesses were interrupted, after all.
Unfortunately, standard business interruption insurance won’t cover claims based on the COVID-19 pandemic and the ensuing governmental shutdowns because traditional business interruption insurance is meant to be an add-on to a property/casualty policy. For that property/casualty policy to kick in, and by extension the business interruption portion to kick in, typically, a business has to have some sort of physical damage to its premises first.
But, say a business could somehow prove that the pandemic caused physical damage. Businesses may still be out of luck because pandemics are almost always written in as exclusions for business interruption insurance policies.
All may not be lost for those business owners, though. Some states and jurisdictions are working with their legislatures and insurance regulators to evaluate whether COVID-19 should be covered under business interruption insurance, despite the policy language that appears to exclude it. Although several states have bills moving through their legislatures to try to compel this change, none yet have been acted into law, and it remains to be seen if those laws would even stand up in court.
There are also questions surrounding how workers’ compensation may be relevant to essential workers who are still working on their employer’s premises. And it is likely also going to get increased attention as the economy begins opening back up and people start filing back into offices.
That’s because, if an employee is working on their employer’s site and subsequently contracts Coronavirus, and that employee can prove that they contracted it a) while working and b) because of their employment, they may be covered under the business’s workers compensation policy. However, proving all those things might be difficult for the employee, leaving some gray area for the lawyers to sort out.
Another area business insurance is being affected is in the billing policies. Some insurers are waiving late fees for premiums if a business had to shut down because of COVID-19, so it would be worth it for struggling businesses to reach out to their insurance company if making those payments becomes an issue.
For more information on how COVID-19 is affecting insurance, including health and life insurance policies, view InsuranceQuotes.com’s full report here.