For Robin and Steve Humble, opening their own restaurant Free Range Kitchen and Wine Bar in Basalt after decades in the local food and wine scene was a dream come true. But the Humbles said this dream has felt more like a nightmare now that they’re limited to takeout only.
“We have a couple that work in our kitchen and they work together every night and there's just not enough work right now,” Steve Humble said. “So I had to look at them and say, ‘Listen. I can only employ one of you right now, and I’m so sorry.’”
Many Colorado restaurant owners are now looking to their insurance companies to help them cover the closures related to COVID-19. But they aren’t getting much help.
Like many restaurant owners, the Humbles have business interruption insurance. It’s a type of property or casualty insurance that typically covers income lost in a catastrophic event like a fire or natural disaster.
When Gov. Jared Polis ordered restaurants to close in-house dining in March, the Humbles submitted a claim to their insurance provider.
“I think all of us put a call out to our insurance companies to say, ‘Okay. How does my business interruption policy work?’” Steve Humble said. “‘When does it kick in, and how much does it pay out?’”
A few days later the Humbles heard back from the insurance company saying their claim was not valid. The email included a copy of the Humbles’ policy.
“The insurance company sent me a 134 page document and highlighted two words and it was the word virus two times,” Steve Humble said. “It didn't say infection. It didn't say pandemic. It didn't say anything.”
In 2006, insurance companies across the country added an exclusion to their policies for loss due to a “virus or bacteria.” The exclusion was created in response to previous viral outbreaks including the SARS epidemic in 2003.
Chef Rob Mobilian owns Piñons restaurant in Aspen, which is closed. He said he didn’t get a chance to file a claim.
“They sent me a letter just explaining, ‘If you think you're going to try to make a claim on this, it's not going to work. We're not going to cover you,’” Mobilian said. “They just flat out told me, ‘Don't call because you're going to get the big no.’”
Mobilian calculates that he’s paid over $420,000 in insurance premiums in the last 32 years that Piñons has been open. He said he’s never made a claim.
“They have it just so figured out,” Mobilian said. “Anything that happens to you, they’re not going to pay, but you just keep making that payment every month.”
With $30,000 a month for rent, no takeout customers, and no immediate help from the government, his landlord or the insurance companies, Mobilian said he had to close Piñons and lay off his employees during the busiest month of the year.
“I usually ring like $14,000 thousand a night in March,” Mobilian said. “It's really the month that we make the most money that carries us through the two off seasons and the slow months.”
Restaurateurs across Colorado are facing similar hardship, including Bobby Stuckey, who was once the sommelier at The Little Nell restaurant in Aspen. Stuckey now owns Frasca Food and Wine in Boulder and other restaurants in the Denver area.
Like Mobilian, he’s paid business interruption insurance for decades. Stuckey said he was denied coverage twice by his insurance company for coronavirus-related losses.
“None of us independent restaurant owners are receiving any help from the insurance companies we’ve been paying to,” Stuckey said. “The country may lose a craft and an industry called the restaurant worker in the next two months.”
The insurance world
Carole Walker is the executive director of the Rocky Mountain Insurance Association, which represents auto, home and business insurance companies in Colorado.
“We realize businesses are struggling through the restaurant shut down during this extraordinary situation,” she said. “We never want anyone to feel blindsided, and we want to help people better understand their insurance.”
Walker emphasized that restaurant owners need to be aware of what their policy does and does not cover.
“Business interruption coverage is generally tied to a specific cause of loss for physical damage that results in businesses inability to do business,” Walker said. “And heartbreakingly for these businesses, property policies typically exclude closure due to a virus or bacteria.”
New York-based attorney Finley Harckham is a national expert on business interruption insurance. He agrees that business owners need to understand their contracts, but he also acknowledged that property policies can be ambiguous.
“If it's not clear the policyholder is supposed to get the benefit of the doubt,” Harckham said. “This problem is affecting the entire country and unfortunately, the insurance industry is going to be even more defensive than ever.”
Lawsuits and political pressure
Keller, along with high-profile chefs Wolfgang Puck, Daniel Boulud, Dominique Crenn and others, are part of the newly formed Business Interruption Group. The legal campaign was launched in partnership with New Orleans-based insurance attorney John Houghtaling who helped determine policyholder rights after Hurricane Katrina and to expose insurer fraud after Hurricane Sandy.
Meanwhile, another group of restaurant owners, including Bobby Stuckey, have formed the Independent Restaurant Coalition to try and save local restaurants impacted by COVID-19.
Stuckey emphasized that restaurants across the country provide jobs for millions of workers. The industry employs 15.6 million people, making it the second-largest private employer in the U.S. according to the National Restaurant Association.
“You think the aviation industry is a big powerful job supplier?” Stuckey said. “They are, but they’re dwarfed by independent restaurant employees.”
A handful of states including New Jersey, Ohio, Massachusetts and New York are considering legislation that would force insurers to pay for COVID-19 related business interruption losses.
The Colorado Division of Insurance, which oversees the regulation of insurance companies statewide, said in an email statement the agency is “currently working on guidance for small businesses and restaurants related to business interruption insurance.”
Harckham said that while state insurance departments do have complaint resolution procedures, they're typically not effective in situations like this.
“They (state insurance departments) really don't like to get into the middle of disputes,” Harckham said. “Especially when there are issues that are going to ultimately be decided by the courts.”
Turning to local governments for help
Roaring Fork Valley restaurant owners are looking to their local government for help.
After learning about the situation from the Humbles, Basalt Town Council member and mayoral candidate, Bill Infante proposed the town address a letter to Colorado Insurance Commissioner, Michael Conway, and to Colorado’s U.S. Senators Michael Bennett and Cory Gardner.
“We hope that it will bring some relief,” Infante said.
“Hopefully with a coalition of voices we will make our case heard,” Infante said. “And this will result in some kind of redress for all of our restaurants that are really being hammered by this coronavirus.”
The Humbles said they’re grateful for the local support, and they’re not letting insurance companies off the hook.
“If the insurance companies choose to turn their backs on their customers 100%, then that's a serious issue,” Robin Humble said. “We pay for insurance for this exact kind of reason.”
For now, the Humbles and other local restaurant owners are just hoping to get back to business as usual soon.