Business Income Cases

Restaurant woes

Author: Madison Kirton Date: 07.06.20

Restaurant woes

You sit down and open the menu: Do you get the Pesto Turkey with wheat bread, mozzarella, turkey, spinach, onions, and pesto? Or do you take the more creative “build your own” route and scour the menu, selecting from a variety of unlikely toppings?

“As of 2016, Americans spend more than half of their food budget eating outside the home,” and, if you’re anything like me, then you can’t resist a good grilled cheese. GCDC LLC v. Hartford Financial Services Group Inc. et al tells the story of the popular Grilled Cheese Bar located on Pennsylvania Avenue in Washington DC. I have had the opportunity to eat at GCDC before the pandemic, and like many urban restaurants, while seating is compact, the food is worth it.

Since early March GCDC has complied with state mandated closures that have brought its gourmet grilled cheese business to a complete halt. GCDC experienced a 95% drop in business income between early March and April, and while the restaurant offers take-out and delivery services, little revenue has been derived using these methods. GCDC’s annual net revenues in 2018 and 2019 were approximately $1.475 million and $1.456 million respectively, and GCDC expected to reach revenues of $1.6 million this year.

According to GCDC’s complaint, the owners believed that they had purchased comprehensive coverage that would apply to business interruptions under circumstances such as Covid-19. When they filed a claim, however, Hartford Financial Services Group’s Sentinel Insurance Company denied coverage. In April, GCDC brought suit on behalf of itself and other DC restaurants similarly situated seeking declaratory relief, insurance coverage owed under the Defendant’s policies, and damages.

However special GCDC’s grilled cheese may be to me, from an insurance coverage perspective, GCDC LLC is just one of many cases where we can see how business interruption has paralyzed the restaurant industry. Multiplying GCDC’s business income losses by the hundreds of other covid coverage restaurant cases in our database, not to mention the thousands of restaurants whose claims are not (yet) in litigation, yields a very large number. That number translates into tens of thousands of lost jobs and changed eating habits for millions of people – changes that may persist even when DC revokes these mandated closures, and whether or not GCDC and other restaurants succeed in their insurance claims.