Downtown’s Proper 21 Sues for Coronavirus Insurance Coverage

Downtown’s upscale sports bar Proper 21 sued its insurance carrier today, becoming one of the first restaurants in D.C. to spark a legal battle over coverage as dining rooms remain closed during the coronavirus crisis.

Plaintiffs NIEUW Group, which also owns Manhattan Proper and Proper West in NYC, debuted Proper 21 in D.C. at 1319 F Street NW in fall 2016, drawing a solid D.C. fan base for its modern American menu, cult “Proper” burgers, happy hour, and weekend brunches. The sports bar was expected to unveil its second D.C. location in Foggy Bottom this month.

The Manhattan import filed a lawsuit on Wednesday, April 8, in the Superior Court of the District of Columbia’s civil division, seeking a judgment against its insurance carrier New York-based Seneca to cover losses incurred during the government-mandated ban on going out to eat and drink. Seneca denied the NIEUW Group’s business interruption-related claim for coverage on April 2.

As many other major cities and states nationwide enact dine-in bans to stem the spread of coronavirus, the big question is whether restaurants will be covered by their carriers. The general consensus is that a global pandemic won’t qualify for business interruption assistance under most insurance policies, as the clause typically exists to cover closures due to property damage from natural disasters like hurricanes and earthquakes.

“We have paid monthly, on time and in full. Now that we have a case where our business is interrupted how can we expect not to be covered?” Proper 21 co-owner Will Strozier tells Eater.

Despite a written-in exclusion for virus-related interruptions in its policy, Proper 21’s lawsuit argues a publicly-enforced dine-in ban is fair game for claiming coverage because its policy includes a “Civil Authority Coverage for Business Income” clause.

“Reliance on a ‘virus’ as a reason for coverage denial is misplaced. Our establishment is not currently closed because of a virus and no employees or customers tested positive. We are closed because a government order has directed us to do so,” says Strozier.

Here’s a copy of the complaint:

The 5,000-square-foot, 200-seat restaurant has sat empty since St. Patrick’s Day, the day D.C. mayor Muriel Bowser ordered dining rooms to go dark until at least April 25.

Strozier says he’s furloughed P21’s entire workforce, which includes dozens of chefs, cooks, bartenders, waiters and waitresses, and managers. Along with reimbursed legal fees, the judgement asks to recover “the full amount of what we have and will continue to lose in business income, payroll and other expenses, as we paid for in our policy,” says Strozier. Like many bar-driven and high-profile businesses in D.C., Proper 21 opted out of carryout or delivery during the dine-in ban.

“Our business model is reliant on a busy city center. We cater to both visitors and the workforce in the heart of D.C.; both of those populations are currently absent,” says Strozier, explaining the market for takeout is not there. “It would cost more to operate than we would be able to do in sales.”

P21 retained Scott Rome of Veritas Law Firm in the suit. Rome also repped D.C.’s Cork Wine Bar in a 2017 lawsuit asserting that the Trump International Hotel enjoys an unfair business advantage in the area. “I’m no stranger to uphill battles,” he says, of taking on David-and-Goliath cases.

Rome tells Eater he’s also been approached by other D.C. restaurants wanting to pursue legal action related to denied coverage during the coronavirus pandemic. He says Proper 21’s policy that covers “physical loss” should be applicable during current conditions.

“We have favorable case law here in that [Proper 21] did have a physical loss — they lost the physical use of the establishment. The mayor’s order is clear ... put chairs on tables and not let anyone sit there. It’s a loss of space,” Rome tells Eater.

When reached by phone on Wednesday, a Seneca manager offered a “no comment” on the lawsuit filed today.

Around the country, other restaurants have already taken legal action against their insurance carriers amidst the coronavirus crisis.

One of the first to file was touristy New Orleans seafood spot Oceana Grill, which argues in its March 20 lawsuit that revenue losses “due to civil-authority actions with coronavirus restrictions” should be covered in its policy with carrier Lloyd’s of London.

Oceana’s lawyer John Houghtaling was also retained by Thomas Keller, the culinary powerhouse behind Yountville’s the French Laundry and Bouchon Bistro, the SF Chronicle reports. Keller filed a similar suit in late March in Napa County Superior Court, saying via statement that “we need insurance companies to do the right thing and save millions of jobs.”

Rome says the mounting legal pressures on insurance companies to “do the right thing” is a positive.

“It’s clear their business is being interrupted. Insurance companies are issuing blanket denials — no matter what the policy says,” he says.

Proper 21’s sister properties in NYC are under separate policies, and carriers have various time frames to respond.

“We have not ruled out any course of [legal] action in New York City at this point,” says Strozier. “We would love to set a precedent where insurance companies have to do the right thing ... our goal is to get relief for every hospitality industry business that is currently being swindled by their insurance carrier.”

Eater has learned at least one other local restaurant — steak-frites chain Medium Rare — is gearing up to sue its insurance company, Hartford Fire Insurance Co., which has also rejected business interruption coverage in the wake of the pandemic.

Law firm Latham & Watkins is currently amassing a group of coast-to-coast restaurants to file a “large, multi-plaintiff” lawsuit against Hartford as coverage denial letters flow in, according to Medium Rare owner Mark Bucher. He says there’s strength in numbers when it comes to fighting a carrier.

“Everyone’s deciding that group force is better and more economical than individual,” he says.

Capitol Hill is also stepping in. On March 26, Politico reported that House lawmakers urged insurance companies to recognize losses from the coronavirus as part of business interruption coverage in a bipartisan letter. But state insurance regulators warned that forcing companies to pay the huge number of claims resulting from the pandemic would lead to worsened economic instability.

“These claims could wipe out insurance companies,” says Bucher. His prediction is “[insurance] policies will never be written the same again. They don’t teach you how to go through a pandemic in business school.”

Medium Rare has pivoted to takeout and delivery at all three area locations in D.C., Maryland, and Arlington, along with making hundreds of free meals for the elderly and first responders each night.

• Bourbon Street’s Oceana Grill Sues for Coronavirus Insurance Coverage [ENO]
• Why Are Insurance Companies Denying Restaurant Claims in Wake of Pandemic? [E]
• Restaurants and Bars Shuttered Across the U.S. in Light of Coronavirus Pandemic [E]
• How Coronavirus Is Impacting D.C.’s Food World [EDC]