NBC 5 Responds

COVID vs. the Consumer: Restaurants Battle to Survive the Pandemic

NBC Universal, Inc.

From our favorite neighborhood joints, to larger chains: restaurants everywhere got squeezed last year, and while some say government aid helped keep them afloat, many are questioning why their insurance didn’t also help, and are taking that question into federal court in Chicago. 

At the Valley Lodge Tavern in Glenview, our Monday afternoon visit found the restaurant and bar quiet. Where there used to be a Monday lunch rush, now tables remain empty. The restaurant is starting to see business pick up, but owner Bill Stavrou says it will be a long climb back. 

 “Absolutely no doubt about it. It's been a tough year and it's been tough, really, really tough on our employees,” Stavrou said. 

Early into the pandemic, Stavrou is among the many business owners who pulled out his business insurance policy, to see what help it could provide.   

“When we first got shut down. I reviewed our policy. I believe that it was applicable to business interruption and that's why I filed a claim,” he said.

That decision by Stavrou has now landed him as one of the lead plaintiffs in a legal case making headlines and being watched by restaurateurs and insurers nationwide.  

The Valley Lodge is one of three so-called "bellwether cases" selected by Chicago-based U.S. District Court Judge Edmond Chang to help determine whether business interruption coverage applies to many restaurateurs across the Midwest. 

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Judge Chang’s ruling in February allowed Stavrou’s complaint, and others like it, to go forward against his insurer, Wisconsin-based Society Insurance. 

Judge Chang’s decision was a major departure from other courts that recently tossed similar cases. In his decision, he wrote that Society’s motions to dismiss the restaurant’s claims “are denied to the extent that they target the claims for business-interruption coverage. Those claims do survive.” 

Judge Chang also wrote, “It is worth pausing here to note that the policy does not contain a specific exclusion of coverage for losses due to a virus or pandemic.”  

Plaintiffs allege that such an exclusion is now standard language in the insurance industry. 

Defendant Society Insurance told NBC5 Responds in a statement:  

 “The court correctly found no coverage under the civil authority, contamination and sue & labor provisions of Society’s policy. But Society is disappointed that the court allowed the claims for business-interruption coverage to survive early motions to dismiss and for summary judgment. The company is exploring its options. This is an early, preliminary ruling, and does not resolve the merits. Society will continue to vigorously defend its interests in the litigation.” 

 How nervous might this decision make insurers, in general? 

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The American Property Casualty Insurance Association, which speaks for the industry, told NBC5 Responds last year that insurers did not price policies to include pandemic-related coverage, and efforts to do so would undermine the stability of the insurance industry as a whole. 

Small businesses nationwide complain that insurers and their blanket denials of business interruption claims represent a broken promise to their customers. To observers, the industry's strategy appears to be working. More than 80% of rulings on this topic over the last year have sided with insurance companies' motions to dismiss, according to a Covid Litigation Tracker maintained and staffed by the University of Pennsylvania law school.

Does the Valley Lodge case represent a change in the wind?  

“For us, we look at it as a great opportunity to state our case in court and see where that leads,” Stavrou said.  

NBC5 Responds will update viewers on the progress of the bellwether cases, as they move forward.

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