Restaurateur sues insurer after it denied his claims
Owner says policy for three restaurants covers losses from government-ordered shutdowns
A Toronto restaurateur and chef is suing his insurance company after it denied his claim for loss of profit because of the COVID-19 pandemic, while a national class-action suit against 10 insurance providers is gaining momentum.
Both hope to inspire more action by small businesses, especially restaurants, to fight back against the insurance industry and get back some of their losses. Hemant Bhagwani owns multiple restaurants in Toronto, including Fat Rabbit, Goa Indian Farm Kitchen and Catering Wala, which are named in his lawsuit.
After the government of Ontario declared a state of emergency March 17, Bhagwani filed insurance claims for lost profit, expenses and more under the insurance policies for three of his restaurants.
The insurance company, Allianz Global Risks, denied the claims. Bhagwani filed a lawsuit for the three businesses and is planning on filing more for his other restaurants.
“In all this I realized the insurance companies were not budging,” said Bhagwani, who has been in the restaurant business for almost two decades.
Allianz did not respond to a request for comment by press time.
The policies for these three businesses state that they cover losses sustained as a result of damages “caused by order of civil authority to retard or prevent a conflagration or other catastrophe,” Bhagwani said.
He said the insurance companies are claiming that the pandemic and the closing have not caused damage to the properties. He thinks the companies
are taking advantage of small print to deny businesses their insurance, which he says is not right.
Bhagwani is suing for damages equal to loss of profit up to 12 months, 90 days’ of payroll expenses and $200,000 in punitive damages. He wants to regain enough money to keep him, his businesses and his more than 600 employees afloat. His business rents alone total $700,000 per month. He said he’s been offered a few deferrals, but no relief.
Bhagwani heard about others in the restaurant industry who were considering lawsuits for the same reasons, but “nobody was taking that step,” so he decided to take the leap. He hopes others follow.
Restaurants are particularly vulnerable to the economic damages caused by the CO
VID-19 pandemic due to their high employee counts and slim profit margins, he said.
On April 23, a survey by Restaurants Canada found that one out of every two independent restaurants did not expect to survive the lockdown without an improvement in conditions.
As of early April, one in 10 restaurants in Canada had already permanently closed, according to Restaurants Canada survey data. Bhagwani said his lawsuit is not entirely about the money.
“I hope I can start something,” he said. “I win or lose, it’s not the point.”
Regina-based Merchant Law Group is launching a national class-action suit against some of the largest insurance companies in Canada for not compensating business owners for lost profits and increased costs during the COVID-19 pandemic.
The representative plaintiff of the suit is a restaurant. Principal lawyer Tony Merchant said he’s received interest from several other establishments that are particularly vulnerable to the economic side effects of the pandemic, especially restaurants.
Merchant said business closures during the pandemic are cases of business interruption, and it’s incorrect of insurance companies to argue otherwise.
He said many insurance companies are claiming the pandemic was unprecedented. He disagrees.
“This was very foreseeable,” he said.