Like a Hole in The Head: Insurance Lawsuits

Some business owners mistakenly believe that insurance is an alternative to doing business continuity. All it can do (can) is help out with finances...after the fact. It doesn't make you less likely to have a disaster or disruption. It's basically worthless if you haven't done anything else. Why? You still have the risk to deal with! And it might not pay, anyway.

I talked about this a little in my recent book - When The Sh*t Hits The Fan. I'm about to go further as I have updated information thanks to Asheville current events. Aside from learning that their business interruption (BI) insurance wouldn't pay out claims, the next thing left for businesses to do is file a lawsuit (if you can afford it). When you're trying to recover from a disaster and a significant dip in tourists who are your customers, who needs to file a lawsuit?

A hotel group filed suit looking for $12.5M in BI compensation from a subsidiary of Liberty Mutual. It is looking for losses to its hotels, garages and restaurants (didn't really think of a hotel having that many mini-businesses, did you?) after Helene. It could not re-open its businesses (eight of them in downtown Asheville) until potable water came back (52 days for them). The insurance company did not see the extended interruption of water services as a "physical loss." For the insurer, physical loss is physical damage. For the business, the inability to use their properties is a physical loss from Helene. The insurance company also said it was not responsible for "indirect" economic loss from the hurricane.

There is an argument that in the immediate aftermath, then-governor Roy Cooper telling people to "stay away, we don't want you here" was an indirect cause of some economic loss. I know some people agreed with that - we're trying to recover, you're adding to the strain - while others said that was the exact wrong thing - there were areas that were fine to welcome tourists which they needed badly but got swept up in the "everything is terrible" messaging. Same with what was being put out by the Department of Transportation: it considered all roads closed.

This is a terrible situation all around. Period. It's been a year and businesses are still suffering and another wave of closures hit in September when the projected bookings for the fall were still too low. The hospitality group has enough money to stay solvent and file a lawsuit. Small businesses? Not really. The hospitality group waited a year for a payout and didn't get it. They'll spend money and wait a bit longer for the chance of getting a payout, then fight an appeal if they win.

See, insurance isn't an alternative. It's a helpful option to help out with finances if you have the right coverage and get your claim paid.