Loss of business lawsuits against restaurants is often a result of government orders that cause restaurants to close, causing huge losses. Many all-risk policies require high premiums and a fully operational business. Plaintiffs argued that their losses were greater than their normal operations, but the court made a clear distinction between the two. This article discusses the most common types of claims against restaurants, including those against Farmers Insurance and the SBA.
Suits against Farmers Insurance
In a recent lawsuit, three San Diego law firms filed a complaint against Farmers Insurance for restaurant and bar loss of profits. They demand unspecified damages and a jury trial. The plaintiff anticipates that this case will become a part of the larger COVID-19 business cases against Farmers. In addition, California Insurance Commissioner Ricardo Lara issued a notice requiring insurers to investigate COVID-19 business interruption claims fairly.
Ollie Irene’s, a popular mountain-top restaurant in Birmingham, AL, sued Farmers Insurance Exchange after the restaurant and bar suffered a total loss of business after a virus infected its restaurant. The restaurant and bar had an “all-risk” insurance policy with Farmers Insurance Exchange. In response to Ollie Irene’s complaint, Farmers denied the insurance claim, citing a lack of direct physical damage and epidemic disease.
In the latest lawsuit, restaurants and bars from Orange County and Southern California are suing Farmers Insurance after the insurance company denied their claims for compensation following the COVID-19 pandemic. The plaintiffs are demanding unspecified damages from Farmers Insurance for denying compensation to their clients. Farmers Insurance reportedly failed to investigate claims and did not fully compensate the restaurants. The lawsuits are expected to last several years.
The suit alleges that the company denied a restaurant and bar’s business interruption claim because the insurer was unable to provide adequate coverage. This policy covers losses from fire, water damage, theft, and property damage. In some cases, the restaurant or bar loses its business after a fire, and this lawsuit may affect other restaurant and bar owners in the same country. But Farmers has yet to comment on the lawsuits.
Pappy’s case alleges that the insurance company was not willing to pay out the full amount of the business interruption coverage despite a COVID-19 closure order. Despite this, Pappy’s sought to represent a nationwide class, as well as a California subclass of policyholders who purchased a commercial property policy from Farmers. It is important to note that a lawsuit against Farmers Insurance is not a final judgment, but rather a court case.
Claims against the SBA
Two recent lawsuits filed by restaurateurs and bars against the SBA for not redistributing funds are in the federal court system. One, by America First Legal, was filed by a restaurant owner in the state of Texas, and another by Jake’s Bar and Grill, a Tennessee-based bar and grill. In the Texas case, a federal judge ruled that the SBA should have awarded grants to businesses that are not racially or sex discriminatory.
Several lawsuits filed by restaurant owners challenged the SBA’s prioritization policy, saying that it discriminated against white men. In response to these legal challenges, the agency ceased processing priority applications and reversed any approvals already given. The agency canceled the payments to restaurant owners after receiving the lawsuits and is now denying grants to restaurants that did not meet the priorities. As a result of the lawsuits, approximately 60 percent of applications were denied. While the SBA has said that it acted responsibly, some white business owners have argued that the prioritization process violates the Constitution.
In the wake of the COVID-19 pandemic, the Small Business Administration has set up the Restaurant Revitalization Fund. It will provide $27 billion in COVID-19 funding for more than 10,000 restaurants. The funds are designed to help historically underserved groups, such as women, veterans, and minorities. However, the fund’s first 21 days were only available to small businesses.
To qualify, the Eating Establishment must have generated at least 33 percent of its gross receipts from sales on-site during the last year. To be eligible, the Eating Establishment must have contemplated on-site sales to the public during the past year. Furthermore, the business must have suffered significant losses in payroll costs. So, a restaurant or bar owner must consider all these factors before applying for the SBA’s financial assistance.
