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280 | Premium Letdown: Hotels challenge property insurers’ refusal to cover COVID-19 revenue loss

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As the hospitality industry struggles to mitigate the massive loss of revenue caused by the coronavirus pandemic, hundreds of hotel owners are filing lawsuits to force their property insurance providers to cover their financial casualties.

Meantime, state and federal lawmakers are considering legislation that would mandate U.S. insurance companies pay for business losses related to COVID-19.

Such a payout could surpass $600 billion, reported Best’s Insurance in May.

American Property Casualty Insurance Association, a trade group, puts the payouts even higher. In June, the association reportedly estimated payouts to would cost insurers $255 billion to $431 billion a month.

The amounts are not sustainable and would ultimately make many insurers insolvent, say insurance industry experts.

Hotel owners say they deserve payouts because they’ve paid premiums for years to cover high-loss scenarios such as the one they’re facing now.

In almost every case, insurers are refusing to pay, saying policies exclude losses caused by a viral plague or COVID-19 has not caused any physical damage to hotel properties that result in a stoppage of business.

It’s fixing to be an epic battle.

In this episode of Lodging Leaders, we examine the issue of business interruption insurance for hotels negatively impacted by the coronavirus pandemic.

We feature Sanjay Patel, CEO of MHG Hotels in Indianapolis who has filed a lawsuit against his insurance provider; Robert Zarco, a partner at the law firm Zarco Einhorn Salkowski & Brito in Miami who specializes in litigating business interruption insurance claims on behalf of business owners; Gregory Riehle, a lawyer and hospitality consultant and former CEO of the Resort Hotel Association, a hotel insurance group; and Robert Hartwig, Ph.D., a clinical associate professor and director of finance at the Center for Risk and Uncertainty Management at the University of South Carolina’s Darla Moore School of Business who’s co-authored a white paper about the un-insurability of businesses affected by viral pandemics.

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