Restaurants Fight To Have Insurance Companies Pay COVID-19 Business Interruption Claims

There was a small victory this week for a group of restaurants fighting to have insurance companies pay out certain COVID-19 claims. CBS 2 Political Investigator Dana Kozlov reports.

Video Transcript

IRIKA SARGENT: A small victory for a group of restaurants fighting to have insurance companies pay out certain COVID-19 claims. A federal judge ruled one case can proceed even though the insurance company tried to get it tossed. CBS 2 Political Investigator Dana Kozlov is live in Glenview, Dana.

DANA KOZLOV: Irika, the owner of this restaurant here in Glenview, another one in Wilmette says he's been paying insurance premiums for decades in part for business interruption coverage. He's never had a claim before. And that's why he decided to fight this denial.

At Valley Lodge Restaurant in Glenview--

BILL STAVROU: We've been in business for 52 years.

DANA KOZLOV: --owner Bill Stavrou and employees are getting ready for the dinner clientele. Lunch hours were scrapped months ago, one of many business hits due to the pandemic.

BILL STAVROU: It's hard to quantify exactly how financially hit. We've been running so hard, so fast to do everything every day that we really haven't done the math.

DANA KOZLOV: But Stavrou says one thing is crystal clear, business at his restaurants has been interrupted. He's been paying Society Insurance to protect him for such an interruption. But Society Insurance denied his claims. So he sued to get them to pay up. Society moved to dismiss the lawsuit, but late Monday, a federal judge ruled Stavrou's case can move forward.

BILL STAVROU: We wouldn't have filed the claim if we didn't believe it was a just cause.

DANA KOZLOV: Even the judge acknowledges this pandemic-related interruption claim is virtually unprecedented. In his ruling he states, "The fundamental questions at stake in the litigation are how properly to classify the interruption that has happened here and whether this particular interruption is covered under the policy" and found the policy does not contain a specific pandemic-related coverage exclusion. Stavrou's attorney, Shannon McNulty, calls the ruling "highly significant" for many Midwestern businesses in particular hit hard by COVID-19.

BILL STAVROU: By definition, I believe that it is-- our business was disrupted or interrupted. And that's, by definition, what we've been, you know, paying for for the last 52 years.

DANA KOZLOV: But Society Insurance does not see it that way. This afternoon, a spokesperson for the company saying they're disappointed with the judge's ruling, but will continue to fight this case, Irika.

IRIKA SARGENT: So Dana, how significant could this case be for other restaurant owners and groups? What could be the precedent here?

DANA KOZLOV: Well, you know, first of all, it is all going to come down to the exact language in these insurance policies and the interpretation of it. But a favorable ruling ultimately could pave the way for many more businesses, especially restaurants, to sue insurance companies for COVID-19-related claims. But on the flip side, it could also do some serious damage to insurance companies. For instance, the judge in this case pointed to a memo from March 2020 in which the insurance company's CEO said to employees that no insurance company has the assets to fund these sort of issues. Only the government does. So, potentially, it could also bankrupt some insurance companies. But all of this will be decided down the line, Irika.

IRIKA SARGENT: Yeah, a lot to weigh there, Dana, thank you.