▶️ COVID-19: Insurance exclusion leaves Jake’s Diner, likely others, looking for answers


When Gov. Kate Brown this week mandated Oregon’s restaurants shift to take-out or delivery only, Lyle Hicks started crunching the numbers.

The math didn’t pencil out – the venerable Jake’s Diner in Bend would lose more money doing that than it would by closing.

Hicks tried to stay open.

Hoping his insurance would offer some assistance to run a scaled back operation, he filed a claim. But the insurer refused to cover the interruption of business.

 “I called them the next day but I was told rather shortly by the adjuster, ‘No, we are not going to cover anything that you have, nor will anybody in the country be covered,’ Hicks said. “I said can you give me a basis for what you’re talking about. He said there’s an exclusion for virus and bacteria. I asked him for the number on that exclusion. He gave it to me. I looked it up and there is an exclusion there.”

Hicks says he was relying on business interruption insurance to retain key personnel and continue operating. 

“When I found out the insurance wasn’t going to cover, I did some penciling and it just doesn’t pencil out. I would be losing more money by staying open than just closing it down so I made that hard decision to shut her down.”

We reached out to Hicks’ insurance company for comment, but they said they’d more time to do some research and get back to us. 

Most business interruption insurance policies cover physical damage to a building that prevent a business from operating such as fire or sewage backups. Industry-wide exclusions for business interruptions caused by viruses and bacteria have been in place for over a decade. 

“So I pay what, $1,600 a month, I’m shut down, and they are saying going ahead and sue us but you gotta keep paying that $1,600 a month or we’ll shut your policy down,” Hicks said. “That, to me, is cold and frustrating.”

Hicks says he laid off more than 30 people so that they could file claims for unemployment benefits.

“It was one of the toughest decisions I’ve ever made,” he said. 

Hicks is tracking a proposed a law in New Jersey that would require insurance companies to pay restaurants closed by civil authorities to prevent the spread of corona virus. 

Insurance companies caution that could set a dangerous precedent of government interference in private contracts, something that’s restricted in the Constitution.

Jake’s Diner closed on Tuesday. 

The owner says he has some cash reserves and hopes to re-open when and if conditions permit.

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