Popular restaurants suing after insurance company denies COVID-19 loss claims

CHARLOTTE, N.C. — Since the start of the pandemic, business owners have been pleading for help, saying they’ve run out of money, patience and hope.

Channel 9 learned that several popular Charlotte restaurants, including Yafo Kitchen, Midwood Smokehouse and Mama Ricotta’s, filed insurance claims with the Cincinnati Insurance Company to recover some of their losses, but were denied.

Now, they’re suing.

The restaurants claim they paid for special all-risk insurance and like many other businesses, they feel they should be able to take advantage of it now.

According to the lawsuit, the “plaintiffs faithfully paid the policy premiums and reasonably expected that the business interruption, extra expense, and/or civil authority coverage provided...” would protect them “...in the event of loss of/or damage to property, including a pandemic, or that state, or local officials ordered the closure of its business due to public safety concerns.”

Mackenzie Spence told Channel 9 she understands the hardships many small business owners are facing. She manages a South End salon and says the pandemic left her searching for ways to make ends meet -- she even thought about filing an insurance claim.

“I definitely looked into it to see if it was possible,” she said. “The more I looked into it the more I realized that it’s not something that even through a loophole would be offered to us.”

An attorney for the restaurants wouldn’t comment on the pending case, but North Carolina’s insurance commissioner sent Channel 9 a statement saying, “I am very interested in the final court ruling in this case because it may have a substantial impact on the insurance industry in this state.” He added, “If the courts force the insurance companies to pay for these COVID losses for which they did not receive premium payments...” it would “bankrupt the insurance industry as we know it.”

North Carolina’s Insurance Commissioner statement:

"I am very interested in the final court ruling in this case because it may have substantial impact on the insurance industry in this state. At one time, pandemics were not excluded in business interruption policies. However, previous administrations excluded this peril. The peril was excluded after the SARS outbreak when the industry began recognizing the devastating impact a pandemic could have on industry viability. The previous administration did not address this issue. Instead, I inherited this mess that has befallen the business community which has no coverage for their COVID losses on their business interruption policies.

"If the courts force the insurance companies to pay for these COVID losses for which they did not receive premium payments, it would cost the industry more than $400 billion a month to cover the losses. This would bankrupt the insurance industry as we know it.

"That is why I have been discussing with the legislature various ways to fix this problem in the future. This is much like what was done with terrorism coverage through the Terrorism Risk Insurance Act (TRIA) after 9-11.

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Cox Media Group