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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Nicolas Graf, associate dean, clinical professor and chair of New York University’s Jonathan M. Tisch Center of Hospitality, will soon unveil the school’s new Hospitality Innovation Hub. Departure from the norms of doing business is key to the post-pandemic survival and success of the hospitality industry, says Graf. Companies that offer flexibility in thought and practice among employees will go a long way in leading the industry’s post-pandemic recovery. Episode 331 of Lodging Leaders explores what it will take for owners, operators and others invested in the industry to attract and retain bright young talent who can help build modern and sustainable hotel business models.
Bijal Patel, 31, is CEO of Coast Redwood Hospitality and the youngest chair of the California Hotel & Lodging Association. He’s made even more history at CHLA by agreeing to serve an unprecedented second term as the lodging industry emerges from the coronavirus pandemic. Patel is a third-generation hotelier. Being so steeped in hospitality at such a young age is not new for members of the Indian American hotelier community, but Patel fears the pandemic has drained the industry of emerging talent. Lodging Leaders spotlights Patel, who represents a leadership demographic that is fighting for the life of the hospitality industry as they watch their peers veer toward other career paths.