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Disruptions in the live music industry throughout the pandemic have been hard on both performers and on the owners of the venues where they play. Many believed their business insurance would help them weather the storm. But Darian Woods and Sally Herships from our economics podcast The Indicator took a closer look, and they found that those policies weren't designed for COVID-19.
SALLY HERSHIPS, BYLINE: Summer Gerbing owns the Ivy Room. It's an independent music venue in Albany, Calif. So when you and I, Darian, walk into a place like the Ivy Room, we're, like, checking out the music, maybe thinking about getting a drink. But as a business owner, when Summer looks around, she is thinking...
SUMMER GERBING: There's liability every time I'm looking out on the floor. You know what I mean? There's always something that I'm like, liability, liability.
DARIAN WOODS, BYLINE: Summer wanted to be a responsible business owner, and she wants to make sure the Ivy Room was covered.
GERBING: Absolutely. You have to get insurance. It is so crucial. You have to protect your business.
WOODS: If anything happened, the Ivy Room was covered. Then the pandemic hit.
HERSHIPS: Summer had about 25 employees, and she was worried about them. They needed their paychecks. But she thought she had that business interruption insurance. So she put in a claim. And about a week later, her claim was denied.
GERBING: I was disappointed, of course, but I wasn't shocked.
WOODS: Still, Summer wasn't going to give up. California had basically ordered her business to shut down, so Summer felt like her business interruption policy should have covered her. So she contacted a lawyer.
GERBING: We did. We thought that we have to fight for our business.
WOODS: Sarah Cronin is an entertainment lawyer in LA, and part of her job is handling what's called insurance recovery work.
SARAH CRONIN: ...Which are disputes with insurance companies where we represent the policyholder.
HERSHIPS: Like the lawsuit that Summer contacted her own lawyer about. It became a class-action suit, asking for millions in damages.
WOODS: Insurance policies with all that small print can be complicated. Insurance works by spreading risk, but when you have a catastrophic event, everyone is affected, so you can't spread the risk.
HERSHIPS: And that's why pandemic coverage in particular is so rare. It's just too much to cover. One representative of the insurance industry wrote me in an email. To the extent any pandemic insurance was available before COVID-19, it was limited, expensive and rarely purchased.
CRONIN: Now, with event cancellation insurance, every insurance company throws on a communicable disease exclusion so that there would not be coverage.
HERSHIPS: No pandemic coverage. Let's say you're a live events venue. Now if there is a spike in the pandemic, you cannot get any insurance coverage. Sarah says there have been some small procedural victories for businesses suing their insurers, but the vast majority of decisions have been in the insurance company's favor. And that's what happened to Summer. Her lawsuit took a year, and she lost.
WOODS: Summer found a way to make it work. She joined a group of thousands of other small venues that formed a national association, and they lobbied Congress and got up to $15 billion in grants. And that's just one of the ways that Summer says she's managed to stay afloat. She says that grant she got will give her a cushion to keep going for a year or two. The Ivy Room is back up and running. The staff is wearing masks, which Summer hopes will make everyone feel safe. And she's still signed up for insurance, although it doesn't include pandemic insurance.
Darian Woods.
HERSHIPS: Sally Herships, NPR News. Transcript provided by NPR, Copyright NPR.
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