Kevin Millonzi has “viral” coverage as part of his business-interruption insurance, but that didn’t save the West Warwick caterer from getting rejected when he filed a claim because of the COVID-19 pandemic.
His insurance company, The Hartford Financial Services Group Inc., told him his policy didn’t cover losses related to the coronavirus crisis, he said. Millonzi, the owner of Millonzi Fine Catering in West Warwick, is now preparing to file a lawsuit.
He wonders why he paid into a policy for years only to be turned down when he needed the help. Like many business owners, he had to lay off most of his employees in the pandemic and has limped through the past year.
His business losses were compounded because he lost immediate sales and future bookings when his insurer didn’t help him, he said, and he had to cancel several long-term contracts.
“The world came to a screeching halt,” Millonzi said of spring of 2020 when events and gatherings were shut down by the state government. “I think that week, I had $40,000 to $50,000 in sales that just stopped.”
Helping small businesses that lost significant revenue due to the pandemic has largely fallen on state and federal programs. The insurance industry has fought – successfully, so far – most of the claims for business interruption filed by policyholders, according to lobbyists who appeared before an R.I. House committee in late February, fighting against a bill that would require insurers to cover businesses for those pandemic losses.
The measure, filed by Rep. Joseph M. McNamara, D-Warwick, has been put aside for “further study.” McNamara did not respond to phone calls seeking comment.
His bill would require companies with business-interruption policies to be indemnified by their insurance companies if they had losses related to the pandemic. The legislation would apply to restaurants, retailers and other businesses that could not document “property damages.” That lack of documentation has been used by insurers to reject claims for business interruption.
‘Many insurers would likely become insolvent.’
FRANK O’BRIEN, American Property Casualty Insurance Association vice president of government affairs
“If insurance companies are going to aggressively sell these products, they should step up to the plate and deliver on their promises,” McNamara said in a news release when he filed the bill.
Several insurance company lobbyists appeared at the House Corporations Committee hearing on the bill in February and urged legislators to defeat it, saying that to require insurers to cover pandemic-related losses would bankrupt them.
It’s a multibillion-dollar fight over insurance coverage for pandemic-related losses that is being waged across the country.
About 2,000 cases in the U.S. have been litigated by businesses trying to claim losses against insurers, said Frank O’Brien, vice president of government affairs for the American Property Casualty Insurance Association. Two major cases have been filed so far in Rhode Island, he noted, but he did not identify them.
In early March, the well-known restaurant chain Legal Sea Foods, which has a location in Cranston, lost a lawsuit against its insurer after a federal judge found the company had no “direct physical loss of or damage” to its property, according to media reports.
Other businesses have similarly failed this year.
A suit filed in March 2020 against Lloyd’s of London by the New Orleans restaurant Oceana Grill was decided in favor of the insurer in late February.
The pandemic has inspired insurers to rewrite their policies to protect against claims for future pandemic-borne losses.
In the cases making it into courts now, the burden is clearly on the businesses because of the contract terms, O’Brien said. “Ninety-eight to ninety-nine percent of them are finding in favor of insurers,” he said.
The reason? Most of the cases that have been tossed out so far involve virus-exclusion clauses, meaning the insurer is not obligated to cover the losses associated with COVID-19. In other cases, insurers have argued the pandemic hasn’t caused physical damage or loss required for a payout.
“Tragically, millions of businesses across the country have closed their doors because of government-ordered shutdowns,” Matthew Sturdevant, spokesman for The Hartford, said in response to a PBN inquiry about Millonzi’s situation. “Unfortunately, viruses are generally outside the scope of business-interruption coverage. These policies do not cover this exposure and, accordingly, premiums were never collected for it.”
To allow businesses to receive payouts would harm the insurance industry, O’Brien said. “Many insurers would likely become insolvent, perhaps in a matter of months, if forced to pay business-interruption claims arising out of the COVID-19 pandemic,” O’Brien said.
Rory Whelan, a regional vice president for the National Association of Mutual Insurance Companies, also urged rejection of the bill, saying it was unconstitutional.
Millonzi also doesn’t see much hope in the state legislation, but he appreciates the effort. In his case, he is hoping his virus coverage sways the court, or perhaps his insurance company. His attorney is Robert Goldberg, of Pawtucket, a former state Senate minority leader.
Millonzi said he plans to try to get some payout from his insurance company.
Educated at Johnson & Wales University, Millonzi opened his catering business, along with a restaurant, more than 11 years ago. He’s since closed the restaurant, unrelated to the pandemic, and had been using the space for small events.
He employed about 28 people before the pandemic. That number is now about six.
When he hears people talking about the economy reopening, he is skeptical. In catering, the business bookings are coming back, but it’s happening slowly.
“People have to start booking,” he said. “I think I have a good case. I look at the insurance bills. Why do you have it? You have it in case something terrible happens.”
Mary MacDonald is a PBN staff writer. Contact her at Macdonald@PBN.com.