What happens when insurance companies refuse to cover pandemic losses? : NPR

Throughout the pandemic, concert halls have had to close across the country. Many homeowners thought their business insurance would help them. But, it turns out their policies weren’t designed for COVID-19.


The disruptions to the live music industry throughout the pandemic have been difficult for both performers and the owners of the venues where they perform. Many believed their business insurance would help them weather the storm. But Darian Woods and Sally Herships of our economics podcast The Indicator took a closer look and found that these policies weren’t designed for COVID-19.

SALLY HERSHIPS, BY LINE: Summer Gerbing owns the Ivy Room. It is an independent concert hall in Albany, California. So when you and I, Darian, walk into a place like the Ivy Room, we’re listening to music, maybe we’re thinking about having a drink. But as a business owner, when Summer looks around, she thinks…

SUMMER GERBING: There’s a responsibility every time I look down. You know what I mean? There is always something like me, responsibility, responsibility.

DARIAN WOODS, BYLINE: Summer wanted to be a responsible business owner and she wants to make sure the Ivy Room was covered.

GERBING: Absolutely. You must take out insurance. It’s so crucial. You need to protect your business.

WOODS: If anything happened, the Ivy room was covered. Then the pandemic hit.

HERSHIPS: Summer had about 25 employees and she was worried about them. They needed their paychecks. But she thought she had that business interruption insurance. So she filed a claim. And about a week later, his request was denied.

GERBING: I was disappointed, of course, but I wasn’t shocked.

WOODS: Still, Summer wasn’t going to give up. California had essentially ordered her business shut down, so Summer felt its business interruption policy should have covered her. So she contacted a lawyer.

GERBING: We did. We thought we had to fight for our business.

WOODS: Sarah Cronin is an entertainment attorney in Los Angeles, and part of her job is to handle what’s called insurance collection work.

SARAH CRONIN: …Which are the disputes with the insurance companies where we represent the insured.

HERSHIPS: Like the lawsuit that Summer contacted her own lawyer for. It became a class action lawsuit, seeking millions in damages.

WOODS: Insurance policies with all that fine print can be complicated. Insurance works by spreading the risk, but when you have a catastrophic event, everyone is affected, so you can’t spread the risk.

HERSHIPS: And that’s why pandemic coverage in particular is so scarce. It’s just too much to cover. An insurance industry representative wrote to me in an email. To the extent that pandemic insurance was available before COVID-19, it was limited, expensive, and rarely purchased.

CRONIN: Now, with event cancellation insurance, every insurance company adds an exclusion for communicable diseases so that there is no coverage.

HERSHIPS: No pandemic coverage. Let’s say you are a live event venue. Now, if there’s a spike in the pandemic, you can’t get insurance coverage. Sarah says there have been some small procedural victories for companies suing their insurers, but the vast majority of rulings have been in favor of the insurance company. And that’s what happened to Summer. Her trial lasted a year and she lost.

WOODS: Summer found a way to make it work. She joined a group of thousands of other small venues who formed a national association, and they lobbied Congress and won up to $15 billion in grants. And that’s just one of the ways Summer says she managed to stay afloat. She says the grant she got will give her a cushion to continue for a year or two. The Ivy room is operational again. Staff wear masks, which Summer hopes will make everyone feel safe. And she’s always had insurance, even if it doesn’t include pandemic insurance.

Darian Woods.

HERSHIPS: Sally Herships, NPR News.

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Kristan F. Talley