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Luis Tamay Chimbo didn’t bother to get insurance for his El Sabor Chuchi restaurant or nextdoor El Chuchi Market in the five years since opening both East Lake Street locations.
Insurance quotes were too high, he said, and in any case he was going to go ahead and fulfill the dream he had since coming to Minnesota in 2003.
During the week of unrest in Minneapolis following the police killing of George Floyd, arsonists burned his restaurant. His market was looted but stayed standing.
“The restaurant, it burned down,” he said. “There’s nothing to rescue. That’s the hard part. I cannot fix it and reopen.”
Now he is waiting to hear whether his landlord will pick up the pieces. Tamay Chimbo has since talked with his building manager, who told him that the landlord did indeed have insurance for the building. If insurance money can be recouped, it will be up to his landlord to decide what to do with it. “Maybe they’ll rebuild the building,” Tamay Chimbo said.
Even if the building has insurance, it may not go far. As business owners begin to navigate insurance claims to reestablish their workplaces, the claims process promises to be anything but smooth. Along the way, they may discover their policies don’t cover all that they need to relaunch, or were shoddy policies to begin with. They also may find their bookkeeping was not adequate for full reimbursement or that a lack of sales during the pandemic shutdown will affect how much they can recoup. What’s worse, some businesses may have canceled their insurance to reduce costs during the downturn caused by the pandemic.
Inti Martínez-Alemán, a St. Paul-based lawyer who specializes in business and employment law, said most insurance for commercial buildings will not cover the kind of damage that more than 500 businesses across the Twin Cities reportedly suffered during the George Floyd protests.
Martínez-Alemán said he’s heard from several business owners who say that fine print in their contracts specifically exclude damage caused by riots.
It’s something that Allison Sharkey, executive director of Lake Street Council, which represents 2,000 businesses along the Minneapolis Lake Street corridor, also said she’s been hearing anecdotally from some members.
But Mark Kulda, spokesperson for the Insurance Federation of Minnesota, which represents 45 insurance companies in the state, said those worries are based on “rumor, conjecture that’s not true.” Insurance policies used to exclude damage from civil unrest, but the industry practice has changed, he said.
“Virtually all standard policies—that’s auto insurance, that’s homeowner insurance, that’s business insurance—specifically include claims for riots, looting and civil disorder,” Kulda said. “So if you have an insurance policy, and it’s a standard policy, then any claims related to the damage we’ve seen will be covered.”
Martínez-Alemán, however, said there are exemptions in the fine print. The policy that covers the building where he works exempts damage caused by an accident, fire, vandalism, explosion or an “electric circuit experiment.”
Such exemptions are common and far-reaching, he maintained. Sometimes the business owner doesn’t even have to sign papers for the insurance to go into effect, Martínez-Alemán said. An insurance company, for example, may give a client 10 days to read the fine print and assume they’ve read and agreed with it upon first payment.
The practice becomes illegal when the exemptions contradict the initial quote, Martínez-Alemán said.
In these cases, “the title sounds like they’re going to cover you, but you have 10 pieces of inclusion and 100 pieces of exclusion,” he said. “So what’s the point of getting insurance in the first place?”
Since the unrest, he’s been instructing clients with exemptions like these to file complaints with the state Department of Commerce. The state will only open an investigation if enough people file similar complaints, he said.
Kulda said the problems businesses might run into are actually different.
Most business owners do not have insurance to cover rebuilding a burned down building, he said, which is more expensive and less common. Most insurance will cover the value of the building and what was inside of it, but not the cost of rebuilding, he said. Replacing an older building that has depreciated in value over the years with a new building will also come at a higher price.
Business owners may run into other issues if they didn’t have up-to-date inventory records, or if their records were stored inside the building and lost when it burned down. Insurance companies may also use most recent sales for determining reimbursements, which for most business owners were severely down during temporary shutdowns amid statewide stay-at-home orders during the COVID-19 pandemic. One way around that, Kulda said, is to use projected sales for the month of June if they were planning to reopen.
Still, Kulda made efforts to paint an optimistic picture on the scenario. Once business owners receive their insurance checks, “it’s going to give them an opportunity to start all over again,” he said.
“This is going to be an opportunity for people to start fresh and not make the same mistakes they made the first time,” he said. “I think what we’re going to see is, there’s going to be a rebirth of a lot of businesses there that are going to be done a little differently, and maybe smarter and better.”
Other than those whose insurance claims don’t cover riot damage, Sharkey of the Lake Street Council said she’s so far hearing affected business owners are finding themselves in roughly three scenarios:
1) They have insurance and are able to recoup everything but their deductible.
2) They have insurance which will cover $50,000 but need twice that to rebuild and reopen.
3) They do not have insurance.
Sharkey said some businesses opted to cancel their insurance policies when COVID-19 hit and they were forced to close down temporarily. Of the independent small businesses on Lake Street impacted during the unrest, she estimated 80 percent of them were immigrant-owned.
Anyone with an insurance issue should consult with a professional, preferably an attorney, about their available recourse, according to Miguel Alexander Pozo, a Minneapolis-based employment lawyer. “Generally speaking, yeah, insurance companies always look for ways to carve out liability,” Pozo said. “But that statement doesn’t apply in blanket fashion to everybody.”
Though perhaps a new phenomenon for Minneapolis and St. Paul, damage from civil unrest is not new to the country, he said, and insurance companies have been challenged on it before.
In the meantime, affected business owners may have to resort to other means for immediate recovery. For Tamay Chimbo, it’s the GoFundMe page that his nephew set up just over one week ago. As of Monday afternoon, Tamay Chimbo had met and exceeded his goal of $100,000 in fundraising from the page.
He reopened his market, which sustained limited damage, including broken windows and stolen items, earlier this week.