Attorney urges restaurant owners to not let insurance companies calculate their loss.
Several businesses—including restaurants—fell victim to rioters who severely damaged their buildings.
In places like Minneapolis, Los Angeles, New York City, and Atlanta, owners are left picking up the pieces, and most will turn to insurance as a way to recover.
Don Scaramastra, an insurance litigator at law firm Foster Garvey, says most policies will cover damage from riots and protests.
If a person owns the building and it’s damaged, he or she likely has coverage for the building. If one is renting, there’s probably coverage for personal property, or equipment inside the space such as glassware, tables, chairs, cookware, etc. If a restaurant is shut down for a long period because of damage, the business interruption policy should kick in and help cover lost income and expenses like payroll and rent.
Scaramastra says there shouldn’t be exclusions preventing owners from collecting business interruption insurance unlike what’s happening with COVID-19.
“Let’s say the protestors burn down a couple of buildings near your restaurant; you close because of that,” Scaramastra says. “That’s going to trigger business interruption under a lot of policies. What you’ve heard with COVID, there’s a robust debate about when or whether virus contamination is gonna constitute property loss or damage. There’s no debate if the building burns down next to you and people just can’t get there or it effectively keeps people from going there.”
If you are an owner in this situation, Scaramastra explains that the first step is to stay safe. Once you’re able to do so, notify the insurance company that you have a claim even if you don’t know all the details at first.
“Some people worry, ‘Oh, I have to get all my papers in order.’ There’s time for that,” Scaramastra says. “First thing is, get a claim in. In some states, if you delay getting a claim in, the insurance company might use that as a basis to deny coverage. Not a problem in most states, but just something to be aware of. I would say the easiest way for most businesses to put a claim in is, if you already know your broker, call your broker. And your broker should be able to put the claim in on your behalf.”
During step 2, he recommends documenting as much as you can, although he acknowledges that may be a problem if records were burned. However, to the extent that you are able, pull all records together, and then speak with an accountant to track expenses and to reconstruct income before the loss.
The next step is to determine how you can mitigate your loss. For example, if your restaurant is in a building and it burns down, would it be better to relocate versus staying out of business for a long period while it’s rebuilt?
The other part of that step is to stay on top of your claim. As you develop your losses, be prepared to articulate them. Scaramastra says most insurance companies require you to submit a “proof of loss” document. Typically, they ask for it in 60 to 90 days. It’s recommended that you read your policy and talk with your broker to figure out when that deadline is and then work toward that date.
“You have to remember, if you leave it to the insurance company to calculate your loss—this is not saying there’s anything wrong with the insurance company—but they don’t know your business, they don’t understand your income model, and they don’t understand your local economy the way you do,” Scaramastra says. “And so they’re going to put together a model for your loss and you may look at it and go, ‘What the hell is that? That’s not how things work.’
If you allow them to do that, if you sit back passively and you let the insurance company tell you what your loss is, you’re very likely to be disappointed.”
Scaramastra notes that in some cases, there may be a restaurant that was shut down because of COVID-19 and then burned down because of a riot, which creates its own set of compounding problems.
“And now you’re going in and saying, ‘Hey, I was out of business the month of July because they burned my restaurant down.’” Scaramastra says. “And the insurance company may come back and say, ‘No, we think you’re out of business because of COVID.’ … I think that’s really going to complicate things for some restaurants and businesses. And complication is a code word for ‘slow things down’ when you’re dealing with insurance claims.”
Fortunately for some restaurants, the community has responded by starting GoFundMe pages or other fundraising resources to help owners with recovery.
Scaramastra says that acquiring money from other sources won’t hinder your ability to receive insurance coverage.
“I don’t know that that’s going to apply in all states; different states may apply that rule differently,” Scaramastra says. “But I would tell anybody that has a GoFundMe site, don’t stop. Don’t stop because of the impact on your insurance. If you are able to pick up enough money to keep yourself running in the next month using GoFundMe, and at the end of the day later some of that money gets deducted from your insurance claim, who cares? Even if it does, it’s not going to penalize you. It’s not like they’re going to take away your coverage. You’re not going to end up worse off by doing that.”
His biggest piece of advice for owners is to not let someone unfamiliar with your business or policy to advise you on what to do.
“If you hear that some trade association in Washington, D.C. says ‘We don’t cover that,’ don’t put too much confidence in that,” Scaramastra says. “And I would say on the flip side, if you read someone who represents policyholders who just tells you, ‘Of course you have coverage for everything and that’s just that,’ I would say take that too with a grain of salt. The devil is in the details and the angels are in the details too.”