UPDATE, APRIL 15: Chef Thomas Keller, whose attorney was interviewed by NBC Bay Area for this story, today published an opinion piece for NBC News. Click here to read the story.
PREVIOUS UPDATE, APRIL 14: After our story first aired on April 10, the California Insurance Commissioner issued a notice requiring insurance companies to "fairly investigate" all business interruption claims related to the pandemic. You can read the entire notice here.
On a typical Friday evening, San Francisco Bay Area restaurants would be packed.
This is no typical Friday, and these are deeply troubling times for restaurant owners and their employees -- many of whom face an increasingly uncertain future.
Some owners of restaurants and other small businesses paid for what's known as "business interruption insurance," a type of property insurance that can help cover costs like payroll and rent when a store or diner can't serve customers. But small business owners nationwide are being turned away when they file claims.
Among them are Maria Aldrete and Rick Mitchell, owners of Luka's Taproom and Lounge of Oakland.
"By phone, I was told that the claim was denied because coverage requires physical damage to the property, and there's a 'virus carve-out,'" Aldrete said.
Mitchell shares his wife and co-owner's frustration. "I was very unhappy about it, but I wasn’t surprised," he told us. "We’ve made a few claims over the years, and, in general, we get denied."
"It’s a shame that they’re not there for us right now,” he added.
Luka's owners allowed NBC Bay Area to review their policy with Northfield Insurance Company. The 84-page document includes an entire section on viruses and bacteria, which reads in part: "We will not pay for loss or damage caused by or resulting from any virus, bacterium or other microorganism that
induces or is capable of inducing physical distress, illness or disease."
NBC Bay Area asked Travelers, which owns Northfield Insurance, for its response to concerns shared by Luka's owners. Travelers declined to comment for this story.
Rebecca Boyles owns Beer Revolution in Oakland. Like Luka's Taproom, her bar is shut down until shelter-in-place orders are lifted. And, like Mitchell and Aldrete, Boyles says her business interruption insurance provider denied her claim.
"I read through my policy, and nothing states 'forced government shutdown" as an exclusion," Boyles told NBC Bay Area. "A virus did not close my business. The government ordered it."
That contention is part of the argument made by attorney John Houghtaling II. He's representing Thomas Keller, owner of French Laundry in Napa and other restaurants around the Bay Area and U.S. Keller is suing his property insurance company for denying his business interruption claim.
In an interview from his Louisiana office, Houghtaling told NBC Bay Area insurance companies are misrepresenting their policies.
“What I decided to do was to file national litigation, around the country, to determine what the law is," Houghtaling said. "I knew that the insurance companies were not telling the truth about the virus, about the dangers of the virus, and about the policies.”
In conjunction with the lawsuit, Houghtaling joined other well-known restaurateurs and chefs like Keller, Wolfgang Puck, and Edouardo Jordan to launch Business Interruption Group, or BIG, with the aim of taking their legal fight nationwide.
“The restaurant industry is the largest private sector employer in America — it’s a chosen profession employing more than 15.6 million Americans and contributes $1 trillion to the economy," Keller wrote on the BIG website. "This entire sector is crippled by a nationwide public health shutdown impacting countless livelihoods. We need insurance companies to do the right thing and save millions of jobs.”
NBC Bay Area recently reported that some travel insurance providers are granting exceptions to their "pandemic clauses". Why not the same for business insurance?
Janet Ruiz, Director of Strategic Communication for the Insurance Information Institute, says there's a big difference.
"Business insurance and travel insurance are incomparable," Ruiz said via email. "Travel insurance generally covers a particular trip, cruise, vacation that is of a relatively short duration. The claims are also relatively small dollar amounts. Travel insurance is able to limit claims to the time period prior to COVID-19 being a known virus and a declared pandemic."
The American Property Casualty Insurance Association (APCIA) says paying all claims for business closures related to coronavirus would destabilize the entire property insurance industry -- which includes homeowner's and auto insurance.
“Many commercial insurance policies, including those that include business interruption coverage, do not include coverage for communicable diseases or viruses such as COVID-19," APCIA said in a statement on its website. "There are some who are calling for actions that would retroactively rewrite existing insurance policies to add new risks to the promises that were made to insurance customers. These types of proposals could have dramatic repercussions for families, individuals, motorists and businesses, potentially compromising the financial ability of insurers to meet their existing promises... If policymakers force insurers to pay for losses that are not covered under existing insurance policies, the stability of the sector could be impacted and that could affect the ability of consumers to address everyday risks that are covered by the property casualty industry."
It's worth noting the property and casualty insurance industry self-reported a $812 billion surplus at the end of 2019.
There's not much business owners can do if their claims are denied, short of costly litigation. In spite of his unhappy experience, Luka's owner Rick Mitchell says he will most likely continue to carry business interruption insurance, whenever Luka's fully reopens.
"It would be irresponsible not to have the insurance," Mitchell said. "But it is frustrating feeling like what it comes down to is, you don't get much benefit."