PHILADELPHIA (KYW Newsradio) — With rising unemployment numbers and many businesses struggling to survive, small business owners are furious to discover that despite not being able to be fully operational, their insurance policies are not paying out business interruption insurance claims right now.
Bucks County state representative Frank Farry says for decades, a lot of businesses have paid their premiums for business interruption insurance.
"And now their business is interrupted and there's an out in the insurance policy that the insurer doesn't have to pay," he said.
But Zarwin Baum attorney Ted Schaer says in most policies, a pandemic was never included in the coverage.
"In no way, shape or form, did traditional insurance companies price policies for business interruption with the expectation that a pandemic like this could trigger a payout," he explained.
Rui Lucas, of NaBrasa Brazilian Steakhouse and Iron Abbey restaurants in Horsham, said Loss of Business insurance is supposed to cover the business owners when there's an interruption in their ability to serve their customers.
"We pay for loss of profit and a pandemic is not one of the things they cover," he lamented. "I mean, you're paying, in my case, for 12 years. For 12 years we've been paying for this lost business insurance and we can't even turn in a claim."
"I mean, that was just another kick in the gut for all these businesses," added Farry.
Schaer said while the situation is unfortunate, "Business interruption policies arise out of traditional property policies and business interruption is only triggered when the insured suffers a physical loss or damage."
He added that to pay all of the pandemic-related claims could prove catastrophic for insurance companies. "From the insurance industry standpoint, if they were to pay out all of the business interruption claims that are being put forth today, you'd see an industry if not wiped out, devastated."
Lucas said he would like legislators to step in and force insurance companies to pay.
"I understand that it's in the fine print, but this is a state emergency that shut us down and there should be some legislation put forward," he asserted.
But Schaer said courts generally uphold transactions between consenting parties. "To rewrite those contracts is against basic contract law," he explained.
Even if businesses wanted to litigate the issue, Bucks County state representative Frank Farry points out they might not have enough funds to do so.
"The insurance companies have the deep pockets to fight you on it," he expounded. "These businesses are struggling, they have no income. The insurers are in the driver's seat."
While Farry said there has been legislation introduced to address the current insurance situation, Lucas says none of that helps his business right now.
"You need them, but when you need them the most they are not there," he said. "It's part of the system and we need to fix that."
