We are living in a profoundly challenging time. Businesses are shuttered, restaurants are closed(or carry out only) and the economy is at a stand still. One of the most famous restaurants in the world is closed and is suing its insurance carrier under its business interruption insurance policy.
The French Laundry is a Yountville, California(Napa Valley) restaurant owned and operated by Thomas Keller. It is housed in a former French Laundry and has been operated by Keller since 1994. It is a three star Michelin restaurant, and if you ever have the chance, save your pennies and GO. I still remember the blood orange venison I had there in 1996…
Here is a review from Wine Spectator:
And something from the New York Times:
On March 18, 2020 Napa County California issued a “stay at home order.” The order was subsequently modified on April 2, 2020. The order requires that all restaurants cease dine in service and only conduct carry out or delivery. The French Laundry serves 9 course tasting menus–they don’t do carry out.
Anticipating that its insurance carrier will deny any claim, the French Laundry filed a preemptive lawsuit seeking a declaratory judgment that coverage for its business losses exists. The French Laundry complaint states that access to its property is prohibited. The French Laundry further alleges that the presence of the Coronavirus that causes Covid 19 is “physically impacting public and private property and physical spaces around the world and the United Sates….any effort by the…Defendants…to deny the reality that the virus causes physical loss and damage would constitute a false and potentially fraudulent misrepresentation….”
In sum, the lawsuit seeks a judgment that “the policy provides coverage to plaintiffs for any current and future civil authority closure of restaurants on Napa county due to physical loss or damage from the Coronavirus under the Civil Authority coverage parameters and the policy provides business interruption coverage in the event that Coronavirus has caused loss or damage at the insured premises or in the immediate area of he insured premises.”
A similar lawsuit has been file in Louisiana on very similar grounds.
Insurance carriers are prepared to argue that these types of claim are not covered. Detailed analyses of arguments against coverage are found here: https://www.zelle.com/Commercial_Property_Insurance_Coverage_and_Coronavirus
In short, policyholders will argue that their businesses are closed due to the order of a civil authority and that the presence of the virus constitutes a covered physical damage to their property.
Carriers will argue that virus exclusions apply and in the absence of such exclusions, they will argue that a traditional physical injury to property(like a fire) is required for coverage to exist. These issues will be hotly contested in the coming months and years and the legal issues are not simple.
Insurance coverage is like politics-anytime you read an article or blog post, be mindful of the source. There are pro-carrier coverage lawyers and there are pro-policyholder lawyers. We have handled insurance matters for carriers and policyholders over the years. While these business interruption claims have similarities, there are different coverage forms that impact whether coverage exists and these are complex claims. We are carefully reviewing these policies for our clients. If you have a question about whether your business interruption policy covers your losses, please call or email me.