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Why These LA Restaurants Are Suing Their Insurance Companies

People walk past the closed Musso and Frank Grill earlier this month.
(Valerie Macon/AFP via Getty Images)
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Let's say you own a small business, perhaps a restaurant. You pay into your insurance policy for years, maybe decades. Then, one day, local authorities order all the restaurants in your county to shut down, except for takeout and delivery. You follow the law and close your dining room, maybe you close your restaurant entirely.

"This is going to be hard," you think, "but at least I have insurance. I've got this covered."

You call up your insurance company and file a business interruption claim. Your insurer, however, sees things differently. They look at your policy and deny your claim.

What do you do? This is the dilemma countless Los Angeles restaurants are facing — and at least three of them have responded by filing lawsuits.

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Bret Thompson is the chef and co-owner of Pez Cantina, a seafood-focused Mexican spot in Bunker Hill. He says the denial of his insurance claim felt "like a slap in the face."

Mark Echeverria, whose family owns and runs Musso & Frank, was also blindsided by his insurance company's denial:

"It feels like we just got thrown to the wayside. It's a contract and we expected to get paid on the claim."

Through a combo of their cash reserves and some PPP money, the old school Hollywood restaurant has managed to keep all 84 of its employees on its payroll.

This is where the rubber meets the road.

Insurance companies — as well as many insurance commissioners in the United States — are clear on their position. They say insurance policies were never meant to cover viruses, especially a once-in-a-century epidemic, and if insurance companies had to pay out for every coronavirus-related business interruption claim, the industry would collapse.

Small businesses have a different point of view.

"This is not something anyone's ever going to admit to but insurance companies write their contracts so that you can argue either side of the issue," says lawyer Jim Baer. "Why? Because it's a very complicated, specialized area and the unwritten rule is he who yells the loudest gets paid."