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Prime Time Sports Grill, a neighborhood joint in Carrollwood, Northwest Hillsborough County, isn’t just a place for little league teams and office softball squads. It’s also open daily until 3 a.m., providing a hub for servers and cooks at other restaurants on Dale Mabry Highway to unwind after a long shift. “We’ve been a go-to spot for 20 years,” says Keith Goan, son-in-law of the owners, Doug and Denise Craine, and an occasional employee and family spokesman.
The pandemic has jeopardized that spot — much like it has done for thousands of others businesses and entities in the region. Now Prime Time is one of a handful of companies in the region to seek relief through suing an insurance company under what’s called a business interruption insurance claim. The goal: replace revenue it lost when it closed for the pandemic from March 20 through April 30, under an order from Gov. Ron DeSantis.
“Just to be able to survive in the restaurant business is tough enough,” says Goan, a trial and personal injury attorney with Morgan & Morgan who is not involved with the Prime Time case legally. “But being closed like that makes it impossible, and that’s why we had business interruption insurance.”
Prime Time’s lawsuit, combined with several others in the area, have helped put business interruption insurance in the spotlight. On a national scale, federal legislation is pending to address disputed claims, while a judicial group considers consolidating some lawsuits into a special court.
‘Pandemic risks are uninsurable on a national basis. It would be like a hurricane hitting every area of the country all at the same time. Only the federal government has the resources to handle that.’ Mark Friedlander, Insurance Information Institute
In addition, a group of businesses in hospitality and a host of other sectors, led by a row of celebrity chefs including Wolfgang Puck, have created the Business Interruption Group, BIG. The group has lobbied elected officials and taken out ads in Times Square in New York City. Its mission, it says, is to seek “solutions that will ensure small and mid-size businesses receive the insurance overage they need in order to keep their doors open.”
The crux of the debate ins threefold: what constitutes a business interruption, what person or thing caused it and what does a specific policy say is covered or not covered under business interruption language. “These policies are tricky,” says Michele Stephan, an attorney with the Sarasota firm of Maglio Christopher & Toale, who counsels clients on filing business interruption claim lawsuits. “You need to read what’s in it in context. They start with exclusions where they take things out and then they have endorsements for putting things back.”
Mark Friedlander, spokesman for the Insurance Information Institute, a pro-insurance industry group, says what’s not complicated is the core of insurance in the first place — that insurers should only be legally required to pay claims for what they collect premiums on. And since Florida’s state insurance statutes, like in most states, allows insurance providers to write virus exclusions into business interruption policies, most of these cases should be a simple denial, he says.
“Pandemic risks are uninsurable on a national basis,” Friedlander says. “It would be like a hurricane hitting every area of the country all at the same time. Only the federal government has the resources to handle that.”
Friedlander adds that if insurers had to pay out business interruption claims on a large scale it would destroy the sector, costing at least $200 billion a month in paid claims. That’s why by 2006, four years after the SARS pandemic caused a litany of businesses interruptions nationally, underwriters began to exclude viruses, bacteria and other similar pandemic-led interruptions from business interruption policies.
In spite of those exclusions Prime Time’s attorney, Michael Laurato, has filed multiple other business interruption claim lawsuits for Tampa area clients. The list includes several dental practices and hair salons, a few other restaurants and College Hunks Hauling Junk, a trash removal franchise business. Other entities in the area that filed business interruption lawsuits after bing denied claims include Lane-Glo Bowl Inc., which operates a pair of bowling alleys in Pasco County, and Counter Culture, a Tampa restaurant. Those plaintiffs have different attorneys. There could be more cases, says Laurato, but few attorneys are willing “to take on these cases because so much is up in the air. They are waiting to see if somebody wins one.”
From the perspective of Prime Time Sports Grill, winning the case should be as easy as a burger and fries. “We paid a policy for many, many years and believe we were covered,” Goan says. “Insurance agents always say insurance is buying peace of mind. But now it looks like they might’ve sold us a bill of goods.”
In general, business interruption insurance requires direct physical loss or damage to the business, or if civil authorities close off an area, to nearby businesses. “The coronavirus leaves no visible imprint or structural alteration,” the institute states in a marketing campaign called the Future of American Insurance and Reinsurance, FAIR — essentially an opposition campaign to the Business Interruption Group.
“Even if remediation is needed — like cleaning metal surfaces — this is no different from removing dirt or mold,” the campaign adds. “Courts have ruled there's no physical damage from mold if the mold can be cleaned off. The same reasoning applies to viruses. Additionally, most policies specifically exclude losses due to viruses, bacteria and contagious diseases.”
Laurato, with the Tampa firm Austin & Laurato, agrees with that point. But in the Prime Time lawsuit he filed against the restaurant’s insurer, DTW 1991, a syndicated underwriter for Lloyd’s of London, he argues it’s not the virus that caused the business disruption. Instead, it was DeSantis’ order to close restaurants and bars statewide, known as a civil authority closure. “Insurance companies are conflating two separate issues — causation and cause,” he says. “Prime Time would not have suffered the loss it did without the state being shut down.”
The Prime Time lawsuit, filed in federal court in April, seeks $200,000 to cover the losses the restaurant suffered during the state-ordered shut down. The restaurant, according to the lawsuit, does about $150,000 a month in sales with monthly operating expenses of $120,000. It has 20 to 25 employees.
Laurato says a fine-print reading of the Prime Time policy proves the restaurant deserves its claim to be paid. “Anything you can possibly think of happening, this policy covers it,” Laurato says. “Think about the earth barreling into the sun. If that happens, this is supposed to be covered by this policy because it doesn’t specifically say that it isn’t.”
Mark Tinker, an attorney for DTW1991, declined to comment on the lawsuit. In a motion to dismiss the case, Tinker writes Prime Time didn’t prove it was the shutdown order that caused the disruption. “The policy’s business income coverage requires that the suspension of operations be caused by a “direct physical loss of or damage to property” at the insured premises,” writes Tinker, with Cole, Scott & Kissane. “Absent any such claim, there is no coverage.”
Going against Prime Time and Laurato — and for DTW1991 — is a recent business interruption lawsuit in Michigan. In that case, attorneys for two restaurants argued virus exclusions shouldn’t result in a denied claim because it was Michigan Gov. Gretchen Whitmer’s shut down order that caused the disruption — not the virus. That’s similar to Laurato’s contention.
The judge in that case dismissed the lawsuit, adding the plaintiff’s civil authority claims “are just simply nonsense, and it comes nowhere close to meeting the requirement that there has to be some physical alteration to or physical damage or tangible damage to the integrity of the building."
Issues in that case and others, as well as the Prime Time lawsuit, are part of ongoing discussions within the seven-member U.S. Judicial Panel on Multidistrict Litigation. Through late July, there were more than 450 federal business interruption lawsuits, plus more in state courts. The panel is considering transferring all the federal cases to a single court.
The Business Interruption Group, meanwhile, supports legislation introduced by U.S. Rep. Mike Thompson, D-Calif., which would reimburse insurers that voluntarily pay COVID-19 business interruption claims. The Business Interruption Relief Act of 2020 would do that through a Business Interruption Relief Program.
That pending legislation brings to light another point: the pandemic isn’t over and more disruptions could be in the offing. Stephan, with Maglio Christopher & Toale, advises any business owner to file a claim with their insurer if there’s another interruption — at least to get it on record. “As the pandemic goes on,” she says, “people might have other interruptions that may or may not be covered.”
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