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Utah restaurant owners want the governor’s help to require insurance companies to pay for how the pandemic has interrupted their businesses.
Supporters of the idea say these “business interruption claims” would rapidly infuse cash into Utah’s hurting economy, letting restaurants pay workers in spite of temporary closures and then open dine-in options later without having to absorb heavy losses.
“This will have a far-reaching, trickle-down impact on our local economy,” says their petition on change.org, which as of Tuesday had drawn at least 2,200 signatures and was rapidly gaining more.
A similar campaign is underway by the National Restaurant Association, which estimates the industry nationwide could lose up to $225 billion and shed as many as 7 million jobs in the next three months due to health-related closures and social distancing.
But Utah’s top insurance regulator said forcing business-interruption coverage under policies not written to cover pandemics could prove “disastrous” for both insurers and consumers.
Utah Insurance Commissioner Todd Kiser said that as a former small business owner himself, he sympathized with those facing closures and those who are forced to have “hard conversations with their employees.” But he said, business insurance policies are contracts written and priced with specific risks in mind — and a pandemic wasn’t one of them.
“If all insurers were required to pay claims but hadn’t been collecting premiums for the [pandemic] risk,” Kiser said, “it would be disastrous for the industry and could have repercussions that extend into the consumer market.”
Herbert and health officials ordered Utah’s restaurants and food-service establishments to close their dine-in services for at least two weeks as of midnight last Wednesday in a statewide effort to limit the spread of COVID-19.
Curbside, drive-thru, pick and delivery options are still available for restaurant patrons.
On top of helping eateries shuttered or forced to offer only take-away menus, owners say insurance relief would also keep restaurant workers from going on unemployment and let them keep paying rent while also keeping an array of suppliers in business, including farmers, wholesalers, small food producers and others.
Kristin Gardiner, a petition backer and co-owner of Taqueria27, with five Mexican-style restaurants along the Wasatch Front, said her chain tried to shift to takeout for two days, but it proved too difficult.
“It is almost impossible to shift your business model in two days,” Gardiner said Monday. But when she asked about coverage to her policyholder, Mutual of Enumclaw, Gardiner was told “a government shutdown for a pandemic is not a covered event.”
“I really felt like that was the wrong answer,” she said.
The owner of Laziz Kitchen, a modern Lebanese cuisine eatery at 912 S. Jefferson Street in Salt Lake City, said he also tried moving to takeaway operations but found it impossible, among other things, to guarantee adequate social distancing amongst its kitchen workers, especially when the restaurant was busy.
“The risks were just too high,” owner Moudi Sbeity said Tuesday. “So we’ve closed down completely as the responsible thing to do.”
The restaurant’s 25 or so workers — many of them single mothers with kids, Sbeity noted — got their last paycheck and a stipend Monday and “the business now has zero dollars in the bank account.”
Though Sbeity said he favors national rent relief as a way to help small businesses and spur economic recovery, he’d also support insurance coverage of business loss claims if it paid “just enough to make sure that our staff can get paid and get by.”
“We exist solely because of the people that work here,” he said. “We would not be here without them.”
Many smaller businesses in Utah don’t even carry insurance for business losses. Greg Arata, owner of Junior’s Tavern, at 30 E. Broadway, said he is instead asking state officials to consider delaying required payments of quarterly sales tax and state withholding taxes, currently due on April 30.
“That’s a big one,” Arata said. His payment ranges between $8,000 and $9,000, he said, and “every time I pay my quarterlies, it takes my disposable income down to almost nothing.”
Proposals to mandate coverage of business interruption claims are being debated in New Jersey, New York, Maryland and South Carolina to address COVID-19 losses. And they have drawn intense criticism from the legal and insurance sectors, in part because they would void specific clauses in many insurance policy contracts to exclude coverage for loss or damage caused by a virus or bacteria.
A Utah official representing the state’s independent insurance agents said Monday coverage exclusions for pandemics are now standard in most commercial policies — and have proved crucial over the years to keeping premiums for small businesses affordable.
Business interruption insurance can cover lost revenues, rents and the like in case of fire, natural disaster and other events. But such clauses are typically written and intended to cover losses from smaller disasters, said Matt Child, CEO of Utah Independent Agents.
“It’s not intended for a mass shutdown of the economy, quite frankly,” Child said.
