Hampshire House, the owner of this iconic Boston establishment, wants a court to force Fireman’s Fund Insurance to pay a business interruption claim.

According to court documents, Hampshire House, which owns two Cheers bars and a number of other establishments in Boston, has a $10 million business interruption policy which the company has refused to pay. Instead, “defendants reached a predetermined conclusion to deny coverage,” Hampshire’s lawyers insist.

Nationwide, over 700 bars, restaurants, gyms, and other small businesses have taken their insurance companies to court over their refusal to pay business interruption insurance claims.

Coverage Issues

Business interruption insurance is usually part of a business insurance suite. These policies pay benefits if certain disasters, which are discussed below, force the insured business to close.

Following the Severe Acute Respiratory Syndrome (SARS) outbreak in the early 2000s, some insurance companies revised their business interruption policies to specifically account for infectious diseases. But for the most part, these policies use boilerplate language which was not designed with once-in-a-century events like coronavirus in mind.

Exact wording varies in different policies. For the most part, insurance companies agree to cover losses related to:

• Physical Damage: These provisions typically apply to fires, floods, and other natural disasters which cause considerable destruction. Coronavirus is also a natural disaster which causes physical damage. COVID-19 molecules live on surfaces for hours or even days.
• Civil Action: Generally, these provisions apply to riots and other extreme events which make it dangerous to open. Insurance company lawyers routinely argue that coronavirus lockdowns were not this extreme, and additionally, the restaurant was not technically closed. Take-out dining was still available, at least in most cases.

To date, almost all insurance companies have refused to cover COVID-related business interruption losses.

Insurance Company Duties

When insured businesses file claims, insurance companies have a duty to promptly acknowledge these claims. That acknowledgement must normally include a presumption that the claim is covered and valid.

Additionally, insurance companies cannot simply rubber-stamp claims “paid” or “denied.” Insurance companies have a duty to investigate the claim. And, they have a duty to begin such investigations straightaway.

Failure to fulfil these and other duties is an independent basis for a bad faith insurance claim. In all bad faith claims, if insured parties must work with a New Orleans civil litigation attorney to protect their financial rights, the insurance company must normally pay all attorneys’ fees.

A business interruption payment could be the difference between staying in business and closing down. For a confidential consultation with an experienced property casualty insurance lawyer in New Orleans, contact Insurance Claim HQ. We do not charge upfront legal fees in these cases.