KANSAS CITY, Mo. — The pandemic has devastated small businesses owners as many struggle to recoup heavy financial losses. Some of those owners thought all-risk insurance policies would help ease that financial burden but some of those insurance claims have not been paid out, and the businesses have taken their fight to the courtroom.
Andy Rieger, the great-great-great grandson of Jacob Rieger, re-established his family’s distillery in 2014. He has a lot on his plate, and that includes making sure his business is protected.
"One of the biggest things you try to fight for with insurance is you're fully covered in all scenarios. Everything with our broker, from me playing out random scenarios, they said we can add that, pick a carrier that does this or that, whatever it was,” Rieger told 41 Action News.
He closed the distillery for five months when the pandemic began and sustained financial losses in the hundreds of thousands of dollars.
Rieger thought his all-risk commercial property policy through The Cincinnati Insurance Company would protect him. He filed a claim in April, and he was denied.
"The ultimate effect of an insurance company not paying out a policy like this in a time like this when we don't have the means to earn revenue,” Rieger said.
He took his claims to court and in August he filed a lawsuit against the Cincinnati Insurance Company alleging breach of contract.
The complaint, filed in the Western District of Missouri, states, “defendants have not paid any funds to date,” and goes on to say that Cincinnati Insurance, “appears to be taking a uniform approach to the current pandemic: deny coverage even when the policy they drafted and offered to insureds, does not contain an exclusion for pandemic or virus-related losses.”
Brad Wilders, an attorney at Steuve Siegel Hanson in Kansas City, is representing Rieger.
"What I hope is the insurance companies realize they wrote a policy that covers these risks, and they reimburse small businesses for their losses. These small businesses can then use that money to get back on their feet and continue to thrive,” Wilders said.
The Cincinnati Insurance Company responded to the lawsuit, arguing their polices don’t cover losses as the result of the virus and related orders, but Rieger isn’t the only Kansas City business suing.
K.C. Hopps, which owns restaurants like Blue Moose, O’Dowd’s and others, filed a similar lawsuit in June, 2020. Their suit against The Cincinnati Insurance Company claims that business was quote, “projected to exceed $17 million in sales in 2020." They sought coverage related to COVID-19, but they were denied.
In a written statement to 41 Action News, The Cincinnati Insurance Company stated,
“We respect the rights of all parties to have their issues heard and resolved in a court of law. For that reason, we do not comment on pending litigation. Cincinnati Insurance remains committed to doing our part to support the families and businesses in our agents’ communities, helping them to proactively manage risks and promptly paying covered claims.”
41 Action News spoke with Lynne McChristian, who is the director of the Office of Risk Management and Insurance Research at the University of Illinois at Urbana-Champaign. She’s worked in the insurance field for more than a decade and said the COVID-19 pandemic is an unprecedented situation for the insurance industry.
"It's very hard for private insurance companies to price for an event that only happens once every hundred years,” she said, adding that specific language in an insurance policy is key.
"It requires direct physical damage to the property and that does not typically happen when there is a pandemic. The property is still usable,” she said. "If something's going to strike every single policy holder at the same time, then that makes it uninsurable because you can't properly price for that."
Wilders says his planned next step is to submit a motion to certify the multiple lawsuits as a class action.
In Baldwin City, Dr. Chris Leiszler is a dentist who also has a policy with The Cincinnati Insurance Company. His office closed temporarily when non-emergency dental procedures were put on hold.
"We filed a claim and said we were put out of business temporarily, this is what we've been paying our premiums for, and I would hope that you will hold up your end of the deal,” Dr. Leiszler said. His claim was denied as well, and he told 41 Action News he’ll consider joining a class action suit if one is filed and certified in court.
"We're a small business. This is my livelihood; this is what I do to provide for my family and employees. I purchased this insurance from Cincinnati with the expectation that they'd be there if something bad happened and they're not,” Dr. Leiszler said.
Brad Wilders said this type of litigation could take years to work its way through the courts, but he and the small business owners he represents say they just want what they believe is right.
"When an insurance company refuses to honor their promise, then it all falls on the back of our small businesses in America,” Wilders said.
"It's maddening. You try to do the right thing, try to be responsible and buy insurance to protect your livelihood and then you get nothing in return after paying premiums all these years, you're just at a loss,” Dr. Leiszler said.
"Obviously we wish that none of this happened, but it's just that our partner holds up their end of the bargain, just like we have for the last 6-7 years and so that's all we ask. Fairness and our partner holding up their end of the bargain and hold up their end of the contract,” Andy Rieger said.
Steuve Siegel Hanson had another case against The Cincinnati Insurance Company in Kansas, but it was recently dismissed, with the judge stating COVID-19 related losses are not covered by the policy. Attorneys for the plaintiff filed a notice in court this month, planning to appeal.