A law office with a legacy seeks to get restaurant employees affected by the coronavirus a little help via insurance policies, fighting insurers who argue that changing business insurance policies to include coverage for pandemics will destroy their industry.
John Houghtaling II of Gauthier, Murphy, and Houghtaling is representing New Orleans restaurant Oceana Grill, against the Lloyds of London insurance company in a lawsuit over civil authority coverage filed last month.
This case asks a judge to decide the law on business interruption insurance policies, and to declare that insurers cannot say that the coronavirus pandemic is not a dangerous property condition.
In an online town hall hosted by the New York Hospitality Alliance two weeks ago, Houghtaling spoke about insurers trying not to pay business interruption insurance policyholders.
“Business interruption coverage is sold by insurance companies and in these policies, it has, specifically, civil authority coverage. That is what is affecting a lot of us, is that the civil authority [government] has actually shut the business down,” said Houghtaling in an interview with the Louisiana Record. “And in these policies, there are specific parts and there are coverages, absent exclusions, for when the civil authority shuts you down, so that your business [is covered] and the measure of the loss is from the time of the shutdown to the end.”
Insurers see it differently.
The business interruption insurance that so many business owners see as a lifeline is a noose for insurers, said David Sampson, president and CEO of American Property Casualty Insurance Association (APCIA).
“Many commercial insurance policies, including those that have business interruption coverage, do not provide coverage for communicable diseases or viruses such as COVID-19. Pandemic outbreaks are uninsured because they are uninsurable,” Sampson said.
Houghtaling has accused the insurance industry of not paying claims that do include virus inclusions.
“They said, effectively and constructively, we are going to take nearly a trillion dollars of your money that is sitting in cash for paying your claims, and they said they’re not even paying claims that have virus inclusions in them. There are claims with pandemics [included in the policies]. They’re paying nobody,” Houghtaling said, later labeling such actions as “morally bankrupt.”
The industry group that Houghtaling is representing – Business Interruption Group (or BIG) – wants to work with the insurance industry leaders to get coverage for applicable claims and settlements for those that could lead to a dispute. But Houghtaling says that he doesn’t think the insurance industry wants to work with his client.
“The industry is refusing to talk. I haven’t had a single phone call from anyone. They went out and they hired lobbyists and crisis managers, and they’re in Washington right now. I won’t say this about everyone on the other side, but I will say that there are a lot of people that will make a lot of money by defending a trillion-dollar horde of cash and not paying it out,” Houghtaling said.
Houghtaling's firm played a role in the Big Tobacco lawsuits of the 1990s that resulted in a $350 billion settlement.
Sampson has said that APCIA now estimates $431 billion per month in closure losses for businesses that have 100 or fewer employees.
“These numbers dwarf the annual premiums for all commercial property risks in the key insurance lines of $71 billion per year, or about $6 billion a month. Continuity losses for small businesses are approximately 43 to 72 times the monthly commercial property insurance premiums, which includes coverage for losses as a result of such perils as fire, wind, hail, and water leaks,” said Sampson.
He did say though, that APCA supports federal assistance programs that get money directly to affected small businesses.