Ohio Court Sides with Restaurant Group in Business Interruption Insurance Lawsuit
Feb 15, 2021
The U.S. District Court for the Northern District of Ohio recently ruled in the case of Henderson Road Restaurant Systems, Inc. vs. Zurich American Insurance Company, that the restaurant group is entitled to business interruption insurance coverage due to lost sales and increasing expenditures as a result of a government-ordered shutdown. Business interruption insurance has been widely disputed during the COVID-19 pandemic as many business owners have sought compensation for losses incurred during government-imposed shutdowns and curfews. The court ruled in favor of the restaurant group claiming it had a valid claim even though a provision within the policy denied coverage for any shutdowns caused by a microorganism. The Court argued the government orders were what caused the shutdown, not the actual novel coronavirus. Thus, the microorganism provision does not prevent the repayment.
In its defense, the insurer argued the restaurant group did not satisfy the requirement within the policy stating business income loss must be tied to “a direct physical loss of or damage to”. However, the court agreed with the restaurant group noting it lost its ability to use the insured properties for their intended purpose. The judge maintained the temporary state and local closure orders led to the restaurant group to suffer a covered loss because the orders prohibited them from allowing in-person dining, which was the foundation of their business model.
The case has been certified for an immediate appeal. If the court’s decision survives the appeal, all businesses in Ohio closed due to shutdown orders may be entitled to recover some form of their losses from their insurer. Policyholders and insurers in Ohio await a resolution of these key issues and will look for clarification of the policy interpretation rules by the Sixth Circuit or the Ohio Supreme Court.
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Kristin Metzger, CPA
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Categories: COVID-19, Restaurant & Hospitality
Small Business Loans & Grants Available To Overcome COVID-19 Impact
Mar 23, 2020
Monday, March 23, 2020
The Federal Reserve announced today an unlimited expansion of bond purchasing programs to help the U.S. economy due to the near-total shutdown to fight the coronavirus.
Treasury Secretary Steven Mnuchin said is he working closely with the Fed to ensure small businesses get the money they need quickly to survive. The bill in Congress would enable small businesses with 500 or fewer employees to get an SBA-backed grant to cover approximately two months’ payroll and some overhead expenses. Methods to distribute the money quickly are being debated, including an option to route the funds through payroll companies. About 40% of all U.S. businesses use a payroll service to process their employees’ payroll.
Businesses in all U.S. states and territories are currently eligible to apply.
The SBA’s Economic Injury Disaster Loan program (in addition to the potential grant) provides small businesses with working capital loans of up to $2 million to provide economic support to small businesses to help overcome the temporary loss of revenue they are experiencing.
The Fed also announced Monday it will buy certain corporate bonds and said it will “soon” announce a Main Street Business Lending Program. These programs are meant to provide ample availability of loans to small and large businesses on top of any efforts Congress does.
Many businesses have business interruption insurance although there is debate on whether a pandemic would be considered since it is not an act of God. Now is the time to contact your insurance agent to review your policy to understand precisely what you are and are not covered for in the event of an extended incident.
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