After nonessential New York City businesses were forced to shut down in March because of the COVID-19 pandemic, many owners filed interruption claims, only to be denied by insurers.
“They paid for business interruption insurance for years,” Olympia Kazi, who works with the NYC Artists Coalition, recently told online news site The City. “And then they hear that COVID-19 is not covered, it’s like the cherry on top of this whole mess.”
Dhruv Chopra, owner of a bar and performance venue called Elsewhere, had been paying hundreds of thousands of dollars a year for insurance premiums, thinking he would get comprehensive coverage – his claim was denied.
“The coverage is large enough that it’s supposed to cover lost sales during a short period of shutdown,” Chopra told The City. “And so we didn’t think anything of a virus exclusion.”
Many insurers added “virus” exemptions after the 2003 SARS outbreak and argue they will not cover losses unless there was direct, physical damage.
“Why did the civil authority shut you down?” Michael Barry, spokesman for the Insurance Information Institute, said in a phone interview with The City. “If the answer is it was the virus and it did not cause direct physical damage, then it is not a covered event.”
Since late March, Assemblyman Michael Carrol has been trying to pass legislation that would force insurers to cover interruption claims filed by small businesses with less than 250 employees.
“The regulators in the state – I don’t believe they interpreted [the virus exemption] to mean if there was a global pandemic,” Carroll said. “They were not expecting this.”
Although Carrol argues the insurance industry has up to trillions of dollars in reserve, Barry said covering the losses would bankrupt the industry.
“Pandemic coverage was out there, it was just so expensive that few people bought it,” Barry said.
Nearly a million City workers lost their jobs since the pandemic according to the NYS Department of Labor, with approximately 318,000 job losses in the leisure and hospitality industry alone.
“You have people that have never asked for business interruption insurance, and they’ve been paying a lot of money for a lot of years for the privilege of having it,” President Donald Trump said at an April 10 coronavirus briefing. “And then when they finally need it, the insurance company says, ‘We’re not going to give it.’ We can’t let that happen.”
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