Restaurant Sues Insurer Over Virus Coverage

Nicholas Harary, owner of Restaurant Nicholas in Red Bank, challenges insurance company policy on virus-related claims.

Nicholas Harary, owner of Restaurant Nicholas in Red Bank. Photo courtesy of Restaurant Nicholas

Like many restaurants, Restaurant Nicholas in Red Bank has an insurance policy with a “business interruption” provision. It covers various emergencies. One emergency it doesn’t cover, according to Nicholas Harary, owner of the restaurant, is viruses.

Harary’s carrier is Liberty Mutual. “They put it into the policies after the 2003 SARS crisis,” Harary told New Jersey Monthly in an exclusive interview. “They are saying we are closed because of the coronavirus. But there is no virus at Restaurant Nicholas. We are closed because of government order.” He is referring to Governor Phil Murphy’s Executive Order No. 107 of March 21, which forbids sit-down dining and restricts restaurants to curbside pickup and delivery.

On Friday, the restaurant filed suit in Monmouth County Superior Court, claiming, “Liberty Mutual is obligated to pay for [the restaurant’s] losses caused when the State of New Jersey ordered that all restaurants cease serving customers within its premises.”

Liberty Mutual’s media relations department did not reply to phone and email requests for comment.

“The federal government is doing an extraordinary job,” Harary said, “but my fear is none of these restaurant employees will have a place to go back to if the employers are not protected. We’re trying to get other restaurants to come along, but nobody wants to be the first. People say, ‘You file and we’ll jump on it.’ So I’m paying the lawyer.”

James Maggs, Harary’s attoney, said that his client’s policy specifically covers closure dictated by government action such as Executive Order 107.

The famed chef Thomas Keller (Per Se, The French Laundry, Bouchon and others) made national news last month when he filed suit in California against his carrier, Hartford Fire Insurance Company. The suit asks the court to decide whether he can be reimbursed under his business-interruption policy for losses caused by California’s order to shut down on-premise dining.

“We need insurance companies to do the right thing and save millions of jobs,” Keller said in a press release.

Frank Cretella, head of Landmark Hospitality (which includes the Ryland Inn, Felina, Liberty House and other New Jersey properties), said, “We were surprised that viruses were covered in our policy, but the amount is not significant. It’s $100,000 for the whole company. We are completely shut down and our losses are tremendous, far beyond that amount. I have not even applied for it yet.”

Added Harary, “If this had happened when we opened, in 2001, I wouldn’t have made it, no way. At this point my companies are diverse and we will be here for many years to come. The big corporate operations will survive, but small operators will be gobbled up. I’m trying to fight for the future of our industry, which right now is in peril.”

Chris Cannon, owner of Jockey Hollow Bar & Kitchen in Morristown, which is temporarily closed, does not see the point in filing a lawsuit.

“There’s a ton of people doing that, but I’m not going to waste money on attorneys right now,” he said. “Doing a lawsuit can cost you a $100,000, and are you going to get that money back? The insurance companies have tons of money, and they always win unless the government intervenes and tells them to pay.”

Robby Younes, COO of the Crystal Springs Resort in Hamburg, said he intends to file a similar suit against his carrier, Hartford Insurance. The resort has been entirely shut down since mid-March.

“We are reaching out to the same law firm that Thomas Keller uses in New York City,” Younes said. “Our company has coverage for business interruption, and we’re fighting on the reasoning it’s a government-ordered shutdown. Insurance will say, ‘You don’t have direct damage physical damage,’ but it doesn’t need to be physical damage. This is clearly an interruption to our business.”

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