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SF Officials Tell Insurance Companies to Stop Denying Claims From Restaurants Shuttered By Coronavirus

A San Francisco resolution says that COVID-19 causes physical damage to restaurants, so insurers better pay up

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Insurance companies are telling restaurants closed by coronavirus-related shutdowns that they’re out of luck
Brittany Holloway-Brown/Eater

A San Francisco Supervisor says that a resolution he proposed Tuesday isn’t just intended to help local restaurants, but businesses across the state that are struggling to survive during the coronavirus crisis.

It’s difficult to quantify how bad California and the Bay Area’s shelter-in-place orders have been for restaurants. Though some restaurateurs say that business started dropping as of mid-February, when concerns about the new coronavirus (COVID-19) started to take hold, things really fell off a cliff on March 16, when six Bay Area counties agreed to shutter restaurant dining rooms and completely close bars, brewpubs, and wineries.

Those Bay Area rules went statewide on March 20, and the soonest things might let up is May 3, according to a new order issued in the Bay Area on Monday. The combination of concerns for personal and worker safety, uncertainty about the end date of the shutdown, and lack of dining room business has left restaurants “fucked,” Eater National writes, and on top of that, insurance claims that those businesses were counting on to help ease the business interruption burden have been denied.

According to restaurateurs who spoke with Eater’s national site, after their restaurants were closed by state and local orders, insurance companies denied claims that were submitted regarding the loss of business, as the insurers say the policies only cover interruptions related to physical damage, not revenue-stripping dining room closures like those we’re seeing today.

Yuka Ioroi, the owner of Outer Richmond restaurant Cassava, tells Eater SF that when she submitted a claim to the Hartford, the business insurance company turned it down almost immediately. “Do you have any documentation from the city confirming that the virus was confirmed at your location?” asks a claims adjuster in an email viewed by Eater SF. “You mentioned there weren’t any confirmed cases of anyone who had the virus and the closure was only due to the government decision on closing dine-in services,” the adjuster says, appearing to argue that unless there was documentation of an infected person on the premises, the denial would remain in place.

According to Supervisor Gordon Mar, that’s a tale his office heard again and again. After meetings with San Francisco restaurant owners and other business leaders, Mar proposed a non-binding resolution during this week’s Board of Supervisors meeting that declares “that Covid-19 is an extreme danger to the public because of its propensity to adhere to surfaces and spread, which causes property loss or damage,” with the goal of encouraging insurance companies to pay out business interruption claims for losses during the shelter in place.

In the order, which can be read in full here, Mar and Supervisors Hillary Ronen, Aaron Peskin, and Sharmann Walton urge the “the California Insurance Commissioner to consider it a material misrepresentation for an insurer to deny insurance coverage by claiming that the coronavirus does not cause property loss or damage,” which is the real teeth of the legislation: As a non-binding resolution, the document isn’t an enforceable law at the local level, but Mar says that by passing it, the Supes will be “sending a message” to Insurance Commissioner Ricardo Lara and state legislators who actually have the power to change the rules for insurance companies that operate in the state.

San Francisco Chamber of Commerce spokesperson Jay Cheng says that the resolution might have another utility for local restaurants, as many of the claim denials he’s seen have asked for some sort of official document that confirms the shutdown. He says that language in a supplemental document issued as part of the Bay Area shelter-in-place order might help with a restaurant’s argument for coverage, but Wednesday’s resolution would make it “even more clear.”

Local resolutions aren’t the only way that restaurants are pushing for their insurance claims to be covered: Napa chef Thomas Keller has already filed suit against his insurance company, even before they turned his business interruption claim down. Lawyer John Houghtaling, who represents not just Keller but New Orleans restaurant Oceana Grill (another spot that had its claim denied), said via statement that “the insurance industry is denying the fact that the coronavirus poses a danger to property,” so Keller assumed that his insurer (like Cassava, Keller’s French Laundry and Bouchon Bistro are covered by the Hartford) would turn him down too.

“I’m not Thomas Keller, and I don’t have any money for a lawyer,” Ioroi tells Eater SF. Instead, she says that she’s encouraging people to “call [SF Mayor] London Breed, call [Governor] Gavin Newsom, call [Speaker of the House and San Franciscan] Nancy Pelosi, call [U.S. Senator] Kamala Harris and tell them it’s time to work for us and make insurance companies cover our claims.”

Cheng says that the SF Chamber is making those calls (and more), and is “attacking the issue from all angles,” which means pushing for local legislation like Mar’s and closely watching litigation like Keller’s. But for now, Cheng says, pressuring politicians might make the most sense, if for no reason other than cost. According to Cheng, while SF’s Chamber of Commerce boasts some very big companies, “about 80 percent of our members are small business, they’re our lifeblood and soul.” These days, those small businesses don’t have the resources to hire nationally-famous lawyers to argue their case against insurance companies, but “that’s why elected officials exist,” Cheng says, “to be our champions.” The question now seems to be if that championship will make it past the local level to actually enact change in Sacramento.


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