Originally published on March 20, 2020, by Bar Business Magazine.  Available at https://www.barbizmag.com/covid-19-resources/covid-19-insurance-are-you-covered/

Adding to the uncertainty of these times is whether or not your bar’s current insurance package covers losses due to the COVID-19 outbreak. We reached out to Pamela Woods, Esq., an attorney at Pasich LLP, a law firm that helps its clients reduce and transfer risk and recover full value from their insurance and risk management assets.

We asked Pamela to help us understand what losses may be covered for bar owners, what to look for in their policies, what they should be documenting, and more. Our questions are in bold, and her responses can be found underneath.

Tell our readers a little bit about your background as well as your role at Pasich.

I’m one of the founding partners of Pasich LLP and, like everyone here at Pasich, my practice is focused solely on getting insureds the coverage they are entitled to receive under their policies. I’ve been doing insurance coverage work off and on for about 15 years, and exclusively for the past eight years. Before getting into this area of the law I taught at UCLA School of Law for 13 years.

COVID-19 has hit the bar and restaurant industry particularly hard. Is the significant decline in revenue caused by the pandemic insured?

The answer to this is the not-very-helpful “It depends.”  Whether there is insurance coverage for loss of business will obviously depend on the language of each business’s policy. However, most property insurance policies provide coverage for loss of business if (i) there is an interruption or suspension of business (i.e., the business is forced to close) and (ii) the interruption or suspension is caused by “direct physical loss of or damage to” property. There is substantial law out there indicating that when property, including surfaces or airspace, is contaminated (such as by a virus) and thereby rendered unusable for its intended purpose, this contamination constitutes “direct physical loss or damage.”

Many property policies also contain “Civil Authority” and “Ingress and Egress” provisions that may provide coverage for loss of revenue. Civil Authority provisions provide coverage when a government or other civil authority prohibits access to the insured’s business.  To the extent bars and restaurants have been ordered to close (whether completely or for in-premises service), this provision may apply. Ingress and Egress provisions may provide coverage for loss of income when ingress or egress to the property is prevented by covered property damage.

Of course, each individual policy will provide limits on the extent of the coverage (in dollar amount and/or the length of the interruption that it covered). Also, some policies have exclusions, including virus exclusions, that may apply.

What are some other losses that may be insured for bars/restaurants?

There is certainly the possibility that customers of bars or restaurants might be infected by exposure to the SARS-CoV-2 virus and may, in turn, sue the bar or restaurant, claiming that the exposure took place at the bar or restaurant. In that case, the business’s general liability insurance should both provide a defense to the lawsuit and pay any damages for which the business is found liable.

Also, because the insureds have an obligation to mitigate (that is, take steps to prevent or reduce) covered damages even before any injury to third parties has occurred, businesses have an argument that they are entitled to reimbursement by their general liability insurers for the reasonable costs of steps they have taken to reduce the chances that third parties are exposed to the virus, such as social distancing, reduced hours, switching to take-out only, or closing.

To the extent that a business’s employees may contract SARS-CoV-2 (the virus) or develop COVID-19 (the disease), the business’s worker’s compensation or employee liability insurance may provide coverage.

Finally, venues that host events may have purchased event cancellation insurance. If so, that insurance may provide coverage if an event is cancelled as a result of SARS-CoV-2.

How can bars/restaurant owners best determine the type of coverage they have? Is there a specific place in their policies to pay attention to?

The first step is to make sure that they have complete copies of their insurance policies. If they don’t, they can call their insurance broker and ask the broker to send them on.

In terms of the policies themselves, there are several parts that are important to look at.

  • First, look at the Declarations page. This should state what kinds of coverage are included in the policies and what the limits of liability are.
  • Second, look at the coverage grant, which will describe the extent of the coverage.
  • Third, look at the exclusions section—this will tell you what kind of limitations the insurer has placed on the coverage grant.
  • Finally, look at any endorsements to the policy. These will usually be at the end of the policy and will amend (sometimes in very significant ways) the terms contained in the policy.

Any advice for bar/restaurant owners on how to go about putting in a claim to their insurance company?

Most policies specifically state how and when an insured should give notice. In many instances, an insured is required to give notice to the insurer “as soon as is practicable.” So sooner is generally better. If you have questions about how to give notice, your insurance broker should be able to give you guidance. Once general piece of advice is not to get too specific with the initial notice unless you know exactly what caused a loss. Let the insurer know that you are giving notice for losses relating to SARS-CoV-2 and/or COVID-19.

What should bar/restaurant owners be doing right now? How should they be recording/documenting their losses?

There’s no magic way to document, the key is to document everything. Document all losses or expenses related to loss of business and expenses incurred in trying to prevent loss. Keep track of your communications with your broker, your insurer, government authorities you have been dealing with, and your international discussions relating to SARS-CoV-2.

Is there any supplementary insurance bars can take out?

At this stage, it may be very difficult (or simply too expensive) to get coverage for these kinds of losses. I’d think that just as terrorism insurance eventually became available again after 9/11 (with government support), the same will happen here.

Any advice for bar/restaurant owners on where to go for help/resources/more information on losses and insurance coverage due to the pandemic?

We have put together a Legal Alert regarding Insurance Coverage for Losses and Claims Associated with the Coronavirus, which we have posted on our website at https://pasichllp.com/insurance-coverage-for-losses-and-claims-associated-with-the-coronavirus/. We will continue to update the Legal Alert as issues develop.  They also can talk to their insurance brokers.