Zagat reports Restaurants Banding Together To Chase Insurance Companies for Denied Pandemic Claims

With my history of decades in the food service industry, and my occupation as an insurance agent, this is a concerning read (link below). Obviously, as a Zagat article, there is much here that demonstrates a lack of understanding of insurance. One point that is fair from the business owners perspective is they buy a possibly poorly-worded “general” coverage called “Business Income” coverage (aka Business Interruption), and without reading policy documents and definitions, it is easy to misunderstand what this coverage is. The same is true for many insurance coverages that have abbreviated, commonly referenced With my history of decades in the food service industry, and my occupation as an insurance agent, this is a concerning read. Obviously, as a Zagat article, there is much here that demonstrates a lack of understanding of insurance. Similarly, I understand that a business owner buys “what they believe to be a generalized” coverage called “Business Income” coverage (aka Business Interruption), and without reading policy documents and definitions, it is easy to misunderstand what this coverage is. The same is true for many insurance coverages that have commonly used abbreviated names or titles: Damage to Premises is another important one that doesn’t actually mean what it generally sounds like, as is Personal Injury, Voluntary Property Damage, Additional Insured, Employers Liability, Non-Owned Auto, Inland Marine, and so on… These are short names for a specific type of coverage that has to be read, understood, or discussed with your agent if you want to know what it REALLY means. So, the miscommunication problem is that policyholders feel like “business income” covers any loss of income, when that is not what it means – that is just an abbreviated term/title for a much more specific type of coverage.

Unfortunately, we all realize that the small, private restaurateur is in an existential crisis. I wish that were not true and that there were an easier solution to help restaurateurs. The food service business model currently has to be radically redefined if there is any hope of surviving, and whether there actually is a long term sustainable model is a big, scary unknown. The primary general purpose of insurance is to be there as a failsafe – to help “make you whole” when there is a circumstance beyond your control that is potentially financially devastating. Clearly, Covid-19 fits exactly into that “primary intent,” however over time as insurance has evolved, there is also a strong case to be made as to why current Business Income claims are being denied. This is disappointing to hear as a business owner because you’d like to believe that “you are buying insurance to protect you against (all) unknowns.” Add to this the overwhelming frustrating legalese of insurance policy forms, and there is plenty of frustration to go around.

A couple of points I’d like to make from my personal perspective:

“A fundamental principle of insurance law is that if something is not specifically excluded, it’s included.” – This is a tricky one. I wouldn’t agree, but would rather clarify two aspects of when this might apply, neither of which apply to Business Income coverage. First, on a Personal Lines Homeowners policy, there is a policy form type called an HO-5, or an “all risk” policy that provides “Special Coverage on Personal Property.” This does indeed mean that for the contents (ONLY! Does not apply to the building!) of your home that you own, every cause of loss is covered unless it is specifically excluded. This endorsement can also be added to many types of regular HO-3 policies. In actual practice, a very, very small percentage of homeowners policies have either this coverage form or this endorsement – up front people don’t want to pay extra for this. However, the Zagat article is not about personal insurance in any way, it is about commercial insurance. Commercial insurance is written on very different forms. The coverage that best approximates the statement is General Liability, a fundamental principle of which is that, “as long as you accurately state (and underwriting approves you for) your intended operations at the inception (and every renewal) of the policy, then any new operations you may begin during the policy term are covered.” Keep in mind that “covered” for General Liability means that if your work causes bodily injury or property damage to others due to your negligence (through action or inaction), then the coverage comes into play (unless excluded). As regards commercial insurance, a more appropriate phrase might be “Insurance doesn’t cover every possible thing, it only covers what it says it covers.”

The government should get involved because they mandated the closure.” This would seem really what is needed here – the protection of the populace is the purpose for government health directives, so some type of assistance for those business hit hardest would seem to be in order. I’ll use this to clarify what the “Business Income” coverage on a commercial insurance policy is – as that is a source of most of the misunderstanding as to why many claims are being denied. Forget about the communicable disease exclusion for a minute – that is another article. Consider from an insurer standpoint that they are not going to be able to cover business income for ANY reason – they simply cannot take on unlimited risk, insurers are not themselves intentionally meaning to go out of business. To help clarify what this coverage is and how it evolved, they added it as an ENDORSEMENT onto an existing LINE of coverage. That line of coverage is Commercial Property. So, Business Income is an enhancement of property coverage. Because it is a property coverage, it requires a property “Covered Cause of Loss” in order to trigger. While the Special Causes of Loss form for business property is broad, keep in mind that it still requires some type of property loss (aka damage) in order to trigger. Thus, the intent, and the wording of this coverage that has the name “business income” should really be understood as “Business income in the event of a property loss.” In other words, it’s like towing coverage after an auto accident. You may not have towing covered for ANY cause of loss on an auto policy, but if your auto is in a covered accident (somebody hits you, you run into a tree), then towing of your vehicle after that accident is covered. The intent (and the wording of policy documents will show this) of the coverage with the abbreviated/common name of “business income” is that when the contractor next door runs a bulldozer through your water supply lines, or a customer drives their vehicle through the wall of your restaurant, THEN the loss of business income as a result of that “triggering” property loss is meant to be covered.

Regardless of the outcome of this situation, the lesson here is to ask questions and to take an interest in understanding what your policy is and what it is not. Don’t think that you’re purchasing a blanket of protection, when what you’re actually getting is coverage for common yet defined scenarios.

The above is in response to the following article:

Why does everybody want to be an Additional Insured?

Sometimes I have to name other people as an Additional Insured. Sometimes I’m required to have my subcontractors name ME as an Additional Insured.

What’s it all mean, and why are so many Additional Insureds being thrown around?

The short answer is “sh** flows downhill.”

The medium answer is that Additional Insured allows for “risk transfer.” Risk Transfer allows the party closest to the actual negligence to be able to legally and financially (through insurance) respond to a claim.

And the long answer:

When YOU add someone to YOUR insurance “as Additional Insured,” you are protecting that entity against YOUR company’s negligence.

Similarly, when someone adds YOU to THEIR insurance “as Additional Insured,” you are protecting YOURSELF against THEIR negligence.


Additional Insured is NOT THE SAME THING as Additional NAMED Insured. These are VERY different!

An Additional Named Insured is typically another operating company that has the same ownership constituency as your company does (e.g. you are 100% owner of both entities).

Most importantly, being listed As Additional Insured on someone else’s policy does NOT mean that you do not need insurance. Only your insurance covers your negligence. Their insurance covers their negligence. Additional Insured status does not change that.

Complicating the concepts of risk transfer and the use of Additional Insured, is that there are three generally different legal applications, depending in which state you/your company is domiciled & insured.  Some states allow (vicarious) liability to be contractually transferred to other entities. Others provide only for clearing of the non-negligent party’s name off of a lawsuit if they did not contribute.

In addition, contracts between main contractors and subcontractors will contain variously stringent applications of the concepts of “indemnify and hold harmless,” and these can affect who responds to a claim. More on that in another article.

The two main types of Additional Insured endorsement are:

  1. Blanket Additional Insured, -or-
    Blanket Where Required By Written Agreement
    This requires an agreement, in writing, executed prior to “occurrence” (and preferably prior to any working relationship) between the parties stating that one shall be required to name the other “as Additional Insured.” Very often this agreement will also have “indemnify and hold harmless” wording as well. There may be other requirements (below) in the agreement.

    1. When a “blanket” Additional Insured (AI) certificate is issued by an insurance agent, there is usually no official record with the insurance company themselves, and no specific policy paperwork that mentions THAT one Additional Insured entity. Certificates are kept on file with the agency. The only part of the insurance policy that indicates there is coverage is a “Blanket Additional Insured Endorsement,” and these come in several flavors (some for Owners, some for Permit Entities, some for Managers of Premises, etc).
  2. Schedule Additional Insured
    This type often does NOT require a written agreement be on file with the policyholder showing requirement of Additional Insured status.

    1. Scheduled AI status is accepted by the insurer (who may need to initially see the contract) and is recorded onto the policy documents for that specific AI entity. Often someone required Scheduled AI status will want to see the official policy document from the insurance company (not just the certificate from the agent) with their name on it.

There are additional clauses which can frequently come into play as regards Additional Insureds, including:

  • Notice of Cancellation
    Very often, interested parties with whom you work will have a requirement to know if your policy is going to be cancelled, say for non-payment of premium. These parties, subject to approval by the insurer and usually a written requirement, can be sent official notification from your insurance company of any changes in your insured status, due to non-compliance, change of market appetite, non-payment or other reasons. Typically requested is 30-day advance written notice of cancellation, with a special exception of only 10-days for non-payment of premium
  • Waiver of Subrogation, -or-
    Waiver of Transfer of Rights of Recovery (against others to us)
    This Waiver is the agreement by the insurance company to “be on the hook” for payout of an insurance claim, EVEN IF it was caused by the waived party. This requires a written agreement (in advance, before any occurrence or claim) that requires the waiver.
    Without a Waiver of Subrogation, in the event of a loss, the insurer reserves the right to “legally become YOU” in court for the purposes of recovering damages (money) that they may have paid out, but they have discovered that someone you work with was actually at fault or negligent in some way.
    See this post for more information
  • Primary and Non-Contributory
    Your policy agrees to pay first, and the other entity’s policy acts as excess after your policy limit is exhausted. However, this endorsement is mostly irrelevant, as the most-negligent party (remember what flows downhill) is the one who always has to pay first before anyone else.

General Liability doesn’t cover my Liability (venue/premises)???

Did you know:

  • General Liability excludes coverage for your liability for property damage to premises you use

With the exception of a few specific cases:

  • Damage to the building portion only,
    • IF by fire
    • Only for your legal liability (claim must arise out of tort/out of your negligence)
  • OR damage to the building and contents rented,
    • IF occupied by you for a week or less (defined as seven consecutive days)
    • For any reason that you would be liable OTHER than fire

Both of the above are:

  • Subject to the “Damage to Premises Rented” sublimit shown in the declarations (usually $100,000 or less – and possibly $0)
  • Only for that portion of the premises occupied by you (does not extend if your damage spreads to other areas of the building)

Any other damage to premises that you occupy is NOT covered by General Liability. If you pay attention to the statements above, you’ll see that a situation such as “FIRE damage to CONTENTS of a location rented for LESS than seven days” is NOT covered!

In addition, while General Liability contains Contractual Liability coverage, that you might think could help out with (lease or usage agreement) contractual requirement for coverage to premises,

  • No coverage is provided by your GL for premises solely by a requirement in a lease (if you are not legally liable, even if you have agreed to be responsible, there is no insurance coverage)

So, when you have a special event, or a film production, and you provide a certificate showing that $1 million per occurrence general liability coverage, and your agent has explained

Liability comes in two parts:

  1. Injury to people (bodily injury), and
  2. damage to property

you think that you’re covered.

You’re not.

This is very important, especially in film production, where a location may be used for more than seven days (including a production office). You have a coverage gap. You have an area where you believe you are covered, but you are not.

There are (at least) three ways to provide for this potentially huge coverage gap:

  1. Third Party Property Damage
    1. Covers property of others in your care, custody and control.
      1. This is the best coverage to add to cover a film location, but is generally NOT asked for by the locations who are asking for “General Liability only” certificates. So beware – without this coverage, you may have huge coverage gaps!
      2. Having a location owner listed as Loss Payee allows for direct payment and settlement with them in the event of a loss.
      3. This is the second most important film production insurance coverage to purchase, after General Liability!
  2. Tenant Liability Endorsement (up to $1 million)
  3. On a Commercial Property policy, you can add the Legal Liability Coverage Form, CP0040, which is for claims that arise from tort (you must be legally liable/negligent)

Specialty Coverage: Child Care Insurance

There is great coverage for child care centers and day care providers, the people who work hard to care for and protect the children under their supervision. Treat your business to the same level of care, attention and protection! Features of this type of insurance can include:

  • General liability up to $ 3 million aggregate
  • Business Income @ Actual Loss Sustained up to 12 months
  • Coverage for water activites and even dog exposures for family child care facilities
  • Errors & Omissions / Professional Liability is included!
  • We have policies that do not automatically add an abduction exclusion

There are some operations that were previously excluded for preferred coverage and had to go to more expensive “Excess and Secondary” markets, but insurers are now able to consider on admitted & preferred “paper:”

  • You can operate up to 24 hours/day! (used to be 16 hours max)
  • Exclusion “buy backs” include optional abuse & molestation
  • We can now add excess medical/accident coverage for children, as long as no overnight care

These types of policies don’t have to be limited just to individual child care. Agents can also look at coverage for your business that does group or family care, 24 hour child care, Montessori schools, Pre-Schools, HeadStart programs, LatchKey operations and Drop-In centers.

Earthquake in New Mexico?

Earlier we discussed some of the insurance coverages pertaining to wildfires, which we certainly see enough of here in the arid high-desert Southwest. However, we found out on Tuesday morning that there had been a magnitude 4.0 earthquake affecting the entire northeast quadrant of the state late Monday night September 12th – resulting in a “suspension of binding authority” on homeowners and renters insurance policies for at least a day as long as no aftershocks were experienced.

While a 4.0 magnitude (30,000/year = often felt, but minor damage) Richter scale earth movement may not provoke even a raised eyebrow in some of you considering events that happen elsewhere, there is still the real risk of structural damage and other kinds of “insurable losses,” as well as a possible wake up call that earthquakes can happen whereever you are – and that you should be considering insurance coverage for them!

While residents of California may be commonly aware that a homeowners policy does not cover any loss or damage due to earth movement (including earthquake), that’s likely because they are regularly presented with an option to buy additional earthquake coverage when they get homeowners insurance. If they have a loan on their house and are in any sort of earthquake-prone zone, then the lender would certainly require the insurance in order to close the loan.

Earthquake coverage, like flood insurance coverage, is something not included on a homeowners policy – you have to ask for it and/or buy it on a separate policy. The occurrence of a 4.0 earthquake in New Mexico this week has us all thinking of the possibilities and new realities of the potential for loss.

Some homeowners insurance policies for homes located outside of earthquake prone zones can allow you to consider “buying back” earth movement coverage for a few dollars a month. Other earth movement policies can be purchased separately.

While the chances may be low that this could affect you, this week’s occurrence right here at home should have you considering the risk of not insuring against future possibilities. For details on earth movement coverage available for you, please contact an agent

Wildfires, Binding Authority & Jargon

There are multitude terms specific to any industry that are used by people in that industry. Occasionally the understanding of those terms can have signicant impacts on the general public. “Binding authority,” is a term used in the insurance world to extend the “handshake agreement” to our day-to-day practices. What binding authority allows your agent to do, is for most of the plain-vanilla home, auto and small business policies, once an agent has rated it with a company… you can then go into that agent’s office, sign some paperwork and pay the down payment – and you can be covered immediately at that instant. That “binding authority” is a courtesy allowed by standard & preferred insurance companies to their agents which allows them to immediately transact business and cover individuals.

This of course adds value to the local agent relationship. For policies that have circumstances that warrant further investigation, consideration and discussion between the agent and the “underwriter” at the insurance company, sometimes binding authority will be suspended on a case by case basis.

For the past week, as I get into my car to head into work in the mornings, I have to turn on my wipers to take what appears to be pollen off of my windshield. While there certainly is a good deal of pollen in the air right now at 7,800 feet in Santa Fe, unfortunately most of the “dust” on my car is not actually pollen, but is ash falling out of the air from the multiple wildfires happening in the southwest. This year seems to have been one of freakish “global winding” issues with massive tornados and extended extreme winds.

Santa Fe, New Mexico, which is about 250 miles from the Wallow fire burning on the AZ-NM border has smelled like a campfire and the air is thick with ash & smoke. Sunsets have been brilliant red – beautiful but deadly. The Wallow fire, the largest of several burning at the moment, is exacerbated by extreme high winds, which are causing burning embers to start new fires up to 3 miles ahead of the front lines. Inciweb reports that over 2,000 firefighters are working with 27 hotshot crews, 29 handcrews, 8 dozers, 141 fire engines, 46 watertenders and 20 helicopters. In one week it has burned a third of million acres and is considers 0% contained at the moment.

In the Southwest, we typically have visibility of 60 miles and over 300 days of sunshine a year. The Santa Fe Ski Area and Santa Fe Baldy are only about 15 miles away from my window, easily within viewing distance. For a week now, the air here, again 250 miles northeast of this fire, has still been so thick with smoke that the mountain is completely invisible. It is regular practice for our insurance companies to send us fax and email updates to “suspend binding authority” for new homeowners policies in zip codes that have current wildfires raging in them. Without that suspension of binding authority, an agent would never know, and the insurance company inspector wouldn’t have time to find out, whether somebody was potentially at risk of trying to insure-after-the fact.

Suspension of binding authority for auto policies is much rarer, however this week in our offices we have begun to see that some companies are now suspending binding authority for “physical damage” (comprehensive and collision) coverage for either new or existing auto policies that are within the affected Arizona zip codes. This is just another indication, specific to our industry, of the size & impact of the tragedies made worse by the lack of precipitation this season.

Considering this binding authority on “comprehensive and collision” brings to mind a story I heard just yesterday in a conversation with a friend. It seems that a relative had either seen an ad on television or received a flyer in the mail and decided to switch their auto policy coverage from an insurance agency to writing it themselves with a carrier who would quote and issue a policy online and promise them a discount for doing so. Be wary of discounts, and consider the value of the advice of a licensed insurance agent professional.

In this particular story, the person bought coverage and seemed to save a large amount of money. Not reading the descriptions of coverage on the website, and not examining closely their current “declarations pages” of their current policy (where an agent can understand more of the data than the average person), this couple decided to forego a coverage that didn’t seem to be needed, called “comprehensive and collision.” Their policy premium went down a staggering $50/month per vehicle and they were thrilled.

Thrilled that is, until 2 months later, when their vehicle, which they owned outright but was only about six years old, was run into while driving in a parking lot. Luckily, neither driver was injured, but the car was considered a “total loss.” They called their insurance company to make a claim, and were informed that because they did not have any physical damage coverage (comprehensive, collision — or even uninsured/underinsured motorist physical damage), there would be no settlement by the insurance company.

Stunned and financially impacted from having to purchase a new vehicle, this couple has now returned to having an insurance policy written by an independent insurance agent and is definitely now asking questions about their property to make sure that they are covered.

The lessons here are to speak with your insurance agent. Don’t leave any stone unturned. Go ahead and ask your questions. Your insurance agent’s job is to protect your financial well being, piece of mind, to protect your assets, and to protect you. Their (our) advice is well worth it!

Policy wording: Prohibited Use (evacuation)

When you go into your insurance agent’s office to get homeowners insurance, you’re confronted with myriad questions and options are are likely concerned mostly with getting done as soon as possible and finding a fair price. Your insurance agent talks to you about “value” and “service,” but it sounds like more marketing talk.

It’s not. Your insurance agent really is there to help you. If ever there’s a good time to ask questions, to not stop until you understand everything, this is it! What could be more important than losing your home?

After you’ve written your homeowner’s policy, a few weeks later you get a thick packet in the mail. A document comprising a hundred pages or more gets removed from the envelope and you probably stow it away in a drawer. It might occur to you that some dark night when you’ve got no other reading material, that this long policy might make for some excellent reading to put you right to sleep. You’re right.

However, actually reading that policy can awaken you to a number of things, all of them sooner or later important, about your policy. Many people think that the document is constructed to be obtuse and “legalese” so that the insurance company can have their own loopholes to get out of coverages in court.

Did you know that the state department of insurance approves the types of coverage offered by those companies and will not let them wiggle out of things?

Those long, legalese documents contain plenty of added information about additional coverages that you have, of which you might never have been aware.

With this year’s prolific fire season, and especially the 3 fires surrounding the Santa Fe area right now, and excellent example of reading the fine print pops up: Prohibited Use.
It is a very real reality that thousands of people in our surrounding communities are being evacuated because of encroaching fire. In addition to the severe emotional hardship involved in distilling your belongings down to what will fit in a car, you worry additionally about having to locate to a mass shelter or a run down motel. This coverage is here to help you out in this time.

Prohibited Use, if you have it (which you likely do) is in the Section I – Additional Coverages portion of that long & boring document. Check your sub-sections under Loss of Use. You’ll find Prohibited Use, which from one of our companies reads thus:

We will pay the reasonable increase in living expenses necessary to maintain your normal standard of living and the loss of fair rental income when access to the residence premises is denied by civil authorities because of a loss to a neighboring premises caused by a peril we insure against.

Note that the language in your policy may be different.

To consider this coverage, think about:

    1. Does your normal standard of living include separate bedrooms, both a bath and a shower, a full kitchen and an outdoor entertainment area? Mine does. A small motel does not have that “normal standard of living.” (of course in the event of an evacuation, your lodging options may be limited – consider driving a bit further to have a little more comfort in this time of need)
    2. Access to premises denied by civil authorities. In my world, mandatory evacuation fits that description perfectly.
    3. A neighboring premises… caused by a peril we insure against. Does homeowners insure against fire? You betcha. Is the surrounding forest neighboring premises? You betcha

Nobody is suggesting that evacuating your home due to a fire is a vacation, but your homeowners insurance company is there to help – in the areas in which they specialize or are responsible – to take as much of the problem, discomfort and difficulty away by paying for you to reside in a location as much like your home and standard of living as what you left.

One important difference between policies to pay attention to will occur in the next sentence in your policy – and that is the length of time that coverage is provided for this. Hopefully, after that period of time, you’ll be able to return back to your home safe and sound.

The lesson here is – even though it may look daunting and unfriendly, actually sitting down and reading that long book of legalese can reveal a plethora of coverages that help you, not hurt you.

We really ARE here to help.

Pool Drain Cover Recall

There have been some unfortunate and tragic incidents related to pool drain covers in the news lately.  Our friends at Philadelphia Insurance’s Loss Control program have advised us of the following Pool Drain Cover Recall that has come as a result of incorrect flow rating by the CPSC:

On May 26th, the U.S. Consumer Products Safety Commission issued a news release stating there is a voluntary recall of several retrofit or replacement drain covers that were installed new or as a result of the “Virginia Graeme Baker Pool & Safety Act” which was effective on Dec 19, 2008.

Per the recall “The drain covers were incorrectly rated to handle the flow of water through the cover, which could pose a possible entrapment hazard to swimmers and bathers.”

Visit CPSC Pool Drain Recall for more information. Each firm below has a website with photos of the recalled drain cover models. Please verify that your pool is not subject to this recall, or if your pool has a recalled drain cover, take immediate steps to have the drain cover(s) replaced.

Eight Manufacturers are cooperating with the recall:

Company Model Information (websites) Dates Sold Remedy
A&A December 2008 –
April 2011
Replacement or Retrofit
AquaStar December 2008 –
April 2011
Replacement or Retrofit
Color Match December 2008 –
April 2011
Replacement or Retrofit
Custom Molded Products December 2008 –
April 2011
Replacement or Retrofit
Hayward Pool Products December 2008 –
April 2011
Replacement or Retrofit
Pentair Water Pool & Spa June 2009 –
April 2011
Replacement or Retrofit
Rising Dragon December 2008 –
April 2011
Replacement or Retrofit
Waterway December 2008 –
April 2011
Replacement or Retrofit

Tips to prepare for a wildfire

From our friends at Acuity Insurance comes this information, which we don’t want to have to think about, but it is better to consider this now and be prepared in advance. This summer has shown a preponderance of dry, drought conditions and high temperatures leading unfortunately to terrible fires burning around the Southwest.

Listed here are several suggestions that you can implement immediately. Others need to be considered at the time of construction or remodeling. You should also contact your local fire department, forestry office, emergency management office or building department for information about local fire laws, building codes and protection measures. Obtain local building codes and weed abatement ordinances for structures built near wooded areas.

Find Out What Your Fire Risk Is

Learn about the history of wildfire in your area. Be aware of recent weather. A long period without rain increases the risk of wildfire. Consider having a professional inspect your property and offer recommendations for reducing the wildfire risk. Determine your community’s ability to respond to wildfire.

  • Are roads leading to your property clearly marked?
  • Are the roads wide enough to allow firefighting equipment to get through?
  • Is your house number visible from the roadside?

Learn and teach safe fire practices.

  • Build fires away from nearby trees or bushes.
  • Always have a way to extinguish the fire quickly and completely.
  • Install smoke detectors on every level of your home and near sleeping areas.
  • Never leave a fire, even “just” a cigarette, burning unattended.
  • Avoid open burning completely, and especially during dry season.

Always be ready for an emergency evacuation.

  • Evacuation may be the only way to protect your family in a wildfire.
  • Know where to go and what to bring with you.
  • You should plan several escape routes in case roads are blocked by a wildfire.