Acclaimed Triangle restaurant owners sue insurer over shutdown coverage

Chapel Hill restaurant plans to relocate

In the lawsuit, the owners ask the insurance company to honor its contracts by "requiring payment for lost business income, extra expenses, and other business related losses in light of COVID-19 and the related actions by governmental authorities requiring closure of their covered business premises."

"It’s quite simple from our end," Kelly said. "We pay the insurance premium, and, you know, when you pay your insurance premium and this is your expectation and this is how your policy reads, they have to live up to their end of the deal."

"At some point, you pay for certain support, and that’s all we’re asking," Bakatsias said. "We’re not trying to be – we don’t want anything for free. We want to make sure we get what we invest in."

Cincinnati Insurance declined to comment on the lawsuit, but the suit states that the company's reason for not providing coverage is because there has been no physical loss or damage to property.

The policies bill themselves as a way to help recover "loss of income and necessary extra expenses you incur to keep your business operating," according to the lawsuit. The policies don't exclude government shutdown orders ot viruses from coverage – Kelly negotiated to make sure the policies would include coverage in the event of a virus because of the norovirus outbreak that occurred in North Carolina in 2018.

The lawsuit also names insurance broker Morris Insurance Agency as a defendant. The agency didn't respond to a request for comment.

Sixteen of the 17 restaurants owned by Kelly and Bakatsias have been forced to close over the past few months due to the pandemic, according to the lawsuit. The 17th restaurant has drastically curtailed its operations – Vin Rouge in Durham recently reopened for take-out service.

The lawsuit stresses that the owners face the possibility of permanent business closure.

"No one knows how fast we can come back to a profitable state," Bakatsias said. "We don’t like to say that we are going to close a business, but everything is possible because nothing is totally predictable at this time."

"There’s going to be some things that we all have to look at in this industry and figure out like how we adapt to the future and to be able to continue our craft and serve guests and make great food," Kelly said.

Paynter said he expects a wave of similar lawsuits in the coming weeks.

"We have dozens of restaurants that we are representing already," he said. "Your income sources have dried up, but at the same time, you want to keep your location, [so] you’ve got to keep paying rent [or] work out some kind of accommodation with your landlord. If you want to keep your talented staff on board, you have to be able to pay them. So, if you can’t do any of those things because your insurance company is not honoring its policy, then that jeopardizes your ability to open back up again."