Established in 1908, John’s Grill has seen its fair share of disaster: It’s survived the Spanish Flu pandemic of 1918, the 1989 Loma Prieta earthquake, and the theft of its Maltese Falcon (the restaurant plays a role in Dashiell Hammett’s 1930 noir novel of the same name). But now, says owner John Konstin, its continued existence is endangered as the insurance policy he thought would allow John’s to shutter during the coronavirus crisis won’t be paid out. So, like many other restaurants across the country, he’s suing.
As Eater National reported in March, restaurants that shuttered when counties and states mandated dining room closures as an attempt to slow the spread of the new coronavirus (COVID-19) were stunned to learn that the business interruption policies that they’d been dutifully paying for refused to cover claims related to the revenue lost during the crisis.
The reason for the denial, say folks like insurance company lawyer Shannon O’Malley, is that these policies only apply to losses related to actual physical damage to the premises (think vandalism or fire). It’s an argument that New Orleans-based lawyer John Houghtaling II seems eager to dismantle in court, telling Eater National just last week that “the argument that the coronavirus doesn’t create a dangerous property condition is a lie...The insurance industry has a PR campaign which misrepresents the policies and what they owe, and they gaslight everyone.”
Houghtaling is just one of a growing list of lawyers who are filing suit against insurance companies that have denied restaurant claims. Right now, Houghtaling counts New Orleans seafood spot Oceana Grill and Thomas Keller’s Yountville restaurants the French Laundry and Bouchon Bistro among his clientele, while in Washington, D.C, two other restaurants are either suing or preparing to.
Add to that list John’s Grill, which filed a lawsuit (you can read the full complaint here) against Hartford Insurance and affiliate Sentinel Insurance in San Francisco Superior Court on Wednesday. “I did not want to file a lawsuit,” Konstin says in an emailed statement, but “I made sure we had insurance to protect the restaurant and our family of employees. Hartford now denies coverage, claiming that the specific provision that says we are protected if a ‘civil authority’ shuts us down, doesn’t mean what it says — we had no choice but to file this lawsuit for all of our employees.”
John’s Grill closed its doors completely as of March 16 to comply with the shelter-in-place order and to ensure the safety of its workers, Konstin says. The expectation was that an insurance claim might get them through the closure, but as their claim was denied “and as the guardian of this institution which I took over from my immigrant parents,” Konstin says he has no other option but to litigate.
Brian Danitz, one of the attorneys representing John’s Grill in the suit, says that he has been “hearing from restaurants and small businesses from all over California and the rest of the country” about denied claims. “This lawsuit will be followed by many more,” Danitz says.
He’s not wrong: As reported by Eater DC, international law firm Latham & Watkins “is currently amassing a group of coast-to-coast restaurants to file a ‘large, multi-plaintiff’ lawsuit against Hartford as coverage denial letters flow in,” and that’s not the only problem insurance companies face as the issue continues. At the local level, legislators are pressuring California Governor Gavin Newsom (and, more specifically, state insurance commissioner Ricardo Lara) to change state insurance regulations in a way that would require companies to pay out these claims, arguing via legislation that claims related to the pandemic should be covered.
Political pressure is also on at the national level, Eater reports, as bold-faced names like Keller, Jean-Georges Vongerichten, Daniel Boulud, and Wolfgang Puck spoke directly with President Donald Trump regarding the matter. Trump “was very open and attentive, and had some good comments,” Vongerichten tells Eater of the insurance-related confab, “but what will happen now, we don’t know.”
So, in the absence of legislation, litigation seems to be the order of the day. According to Joe Cotchett, another lawyer in the John’s Grill case, “We intend to show that Hartford and its affiliates gladly accepted money from San Francisco’s Historic John’s Grill for insurance coverage they had no intention of providing. Our intention, in this case, is to fight to end this dishonest and egregious practice and change how the insurance industry does business in this country.”
- Why Are Insurance Companies Denying Restaurant Claims in Wake of Pandemic? [Eater National]
- The Ugly Legal Battle Over Restaurant Insurance Has Begun [Eater National]
- Bourbon Street’s Oceana Grill Sues for Coronavirus Insurance Coverage [Eater New Orleans]
- The French Laundry’s Thomas Keller Sues His Insurance Company Over Coronavirus Coverage Denial [Eater San Francisco]
- Downtown’s Proper 21 Sues for Coronavirus Insurance Coverage [Eater DC]
- SF Officials Tell Insurance Companies to Stop Denying Claims From Restaurants Shuttered By Coronavirus [Eater San Francisco]