Storied Musso & Frank's Survived the Spanish Flu Pandemic, Now It's Filing Suit to Survive COVID-19
Tami Abdollah is dot.LA's senior technology reporter. She was previously a national security and cybersecurity reporter for The Associated Press in Washington, D.C. She's been a reporter for the AP in Los Angeles, the Los Angeles Times and for L.A.'s NPR affiliate KPCC. Abdollah spent nearly a year in Iraq as a U.S. government contractor. A native Angeleno, she's traveled the world on $5 a day, taught trad climbing safety classes and is an avid mountaineer. Follow her on Twitter.
The owner of Musso & Frank Grill, an iconic L.A. restaurant, filed a federal lawsuit Tuesday against its insurance company, alleging breach of contract and bad faith for not covering its loss of income due to the COVID-19 pandemic.
In the 243-page lawsuit filed in the U.S. District Court of the Central District of California, attorneys for Musso & Frank Grill allege that Mitsui Sumitomo Insurance USA, Inc., in New York, failed to handle the restaurant's insurance claim for business interruption losses in a manner consistent with the standards of good faith and fair dealing.
The restaurant, which is represented by Michael J. Bidart, managing partner of Shernoff Bidart Echeverria LLP, said its original claim for lost business income was submitted promptly after having to suspend operations because of L.A. Mayor Eric Garcetti's order on March 15 prohibiting restaurants from serving food on their premises or bars from serving alcohol. They are now demanding a jury trial.
Known for hearty foods, like its chicken pot pies, and martinis, Musso & Frank's has been visited by Charlie Chaplin who was known to enjoy broiled lamb kidney or duck when in season, as well as Bing Crosby, Steve McQueen, Charles Bukowski and Quentin Tarantino, who featured it in his film "Once Upon a Time in Hollywood."
The storied restaurant, which has been a favorite of tourists, celebrities and filmmakers, is an L.A. staple that celebrated 100 years on Hollywood Boulevard in September and received the first-ever Walk of Fame star given to a restaurant. But despite it first opening its doors in 1919 amid the Spanish flu pandemic, which infected roughly 1/3 of the world population, Musso & Frank Grill has found COVID-19 particularly challenging, as it's been forced to temporarily close its doors.
It's one of many L.A. businesses that has faced hard decisions and tough outlooks because of the economic shockwaves wrought by the novel coronavirus. From layoffs at Sweetgreen and Bird, to pivoting to produce masks or run COVID-19 tests, businesses have had to find ways to survive and reinvent themselves. But for old school ventures like restaurants, if that fails amid a natural disaster, insurance is supposed to kick in.
The restaurant accused its insurer of failing to adequately consider or investigate claims, and that it has done so to other policyholders to earn "illicit profits" at their expense. A spokesperson for Mitsui Sumitomo said Wednesday morning that the company does not comment on pending litigation.
Restaurants like Musso & Frank's, which counted on so-called business disruption insurance to offset their losses ended up facing up to a previously esoteric exception that regulators put in place in 2006 after the SARS outbreak, which excludes coverage for "loss or damage" due to "virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease."
The lawsuit notes that Musso & Frank's insurance policy also includes a specific "exclusion of loss due to virus or bacteria" which matches such language.
"Our position, not withstanding the virus exclusion, is that the government order is the predominate reason for the loss," Bidart said. "It's not solely due to the virus. When you compare the relative weight of the perils, the closing down order is what really caused the shutdown. In California law, the simple point is you cannot properly deny a claim without doing an analysis of whether or not the non-excluded peril of government action is the predominate cause."
Mark Echeverria, the owner and COO of the company said in a statement that there is no evidence that the restaurant's employees or customers were exposed to or had contracted COVID-19 at the time of closure.
"A situation such as this is EXACTLY WHY businesses carry business insurance interruption policies!" he said.
Musso & Frank's is one of a slew of examples of the impact the roughly monthlong lockdown has had. In the U.S., restaurant customer transactions dropped 43% in the first full week of April (the week ending April 12) compared to a year ago, worsening from the 41% seen the week prior, according to the NPD Group's data.
The newly-formed Independent Restaurant Coalition was created by a group of chefs to save local restaurants being hard-hit by COVID-19. The coalition is pushing for multiple tweaks to federal stimulus, including ensuring that business interruption insurance covers the novel coronavirus.
Meanwhile, the National Retail Federation and 16 other business organizations, including the National Restaurant Association, sent a letter to Congress on Tuesday, urging swift passage of legislation that would create a federal program to help businesses get insurance coverage for future pandemics. The program would be modeled on terrorism insurance established after 9/11.
"When businesses couldn't obtain coverage for acts of terrorism after 9/11, Congress stepped in," said David French, the NRF's senior vice president for government relations, in a statement. "It's time for Washington to do the same for pandemics. Retailers and other businesses across the country have seen unprecedented losses related to COVID-19 that weren't covered under most current insurance policies and won't be covered if there's a second wave of the virus next winter."
French said passage of the Pandemic Risk Insurance Act of 2020, would enable businesses to "rebuild confidence" and "provide a mechanism for immediate and predictable economic recovery" if the U.S. faces another pandemic.
In the letter, the organizations endorse the new bill, which Rep. Carolyn Maloney, D-NY, a senior member of the House Finance Services Committee, plans to introduce soon. There is a similar bill planned by Rep. William Lacy Clay, D-Mo., who is chair of the Housing, Community Development and Insurance Subcommittee.
The bill was developed with input from the NRF and is backed by the Rep. Maxine Waters, D-Calif, who chairs the U.S. House Committee on Financial Services. It would require insurance companies offer policies covering pandemics but would create a federal backstop program to reimburse insurers when claims related to a pandemic or epidemic exceed $250 billion nationwide. Coverage would also be required for large gatherings, including sporting events, concerts and conventions that are canceled. The program would not apply to the current pandemic and would be capped at $500 billion.
"Congress must take swift action and begin contemplating a solution to provide all businesses protection against future pandemic risk," the letter states. "This approach would serve as a cornerstone to a proactive and prospective approach to managing the risk of a widespread and catastrophic pandemic or epidemic in the future."
In a statement, David A. Sampson, president and CEO of the American Property Casualty Insurance Association, said "pandemic outbreaks are uninsured because they are uninsurable."
APCIA, the primary national trade association for home, auto, and business insurers, estimates that continuity losses for small businesses are roughly 43 to 72 times the monthly commercial property insurance premiums, which includes coverage for losses resulting from fire, wind, hail and water leaks. It said that closure losses for small businesses with 100 or fewer employees has increased to as much as $431 billion per month, dwarfing annual premiums for all commercial property risks in key insurance lines of $71 billion per year.
Sampson said any effort to retroactively mandate insurance coverage for viruses by voiding such exclusions "would immediately subject insurers to claim payment liability that threatens solvency and the ability to make good on the actual promises made in existing insurance policies."
*Updated at 10:23 a.m. PT to add the insurance company's comment.
**Updated 11:18 a.m. PT to include Musso & Frank Grill owner's comment.
Subscribe to our newsletter to catch every headline.
When the founders who lead the ten young startups selected for the 2020 Techstars LA class begin their three month accelerator program Monday, they won't be gathering in the Mid-Wilshire office and shaking hands as every other class has done. Like the rest of us, they will be working at home because of the coronavirus. Dinners, meetings, socializing, and mentoring sessions will all be online.
"A big part of the magic of the program is the relationships that are from proximity and from everyone working together in the same space and so what we're doing is we're endeavoring to create as much as that connection in the virtual world as possible," said Anna Barber, managing director of Techstars LA.
Pod People<p><a href="https://podpeople.com/" target="_blank">Pod People</a> is a full-service podcast production and staffing agency with a network of over 700 audio professionals across the globe.</p><p><a href="https://brdg.app/s/o56p6c" target="_blank">Contact the founder >></a> <br></p>
JoyHub<p><a href="https://www.joyhub.io/" target="_blank">JoyHub</a> 's enterprise software integrates multifamily operator systems into a single, centralized data platform. </p><p><a href="https://brdg.app/s/io9a3s" target="_blank">Contact the founder >></a> </p>
Ayana Therapy<p><a href="https://www.ayanatherapy.com/" target="_blank">Ayana Therapy</a> provides online therapy for minorities with an emphasis on intersectionality. </p><p><a href="https://brdg.app/s/gdwa78" target="_blank">Contact the founder >></a></p>
CLLCTVE<p><a href="http://cllctve.com/" target="_blank">CLLCTVE</a> is a platform connecting college creatives with brands targeting Gen-Z consumers. </p><p><a href="https://brdg.app/s/bgc9pp" target="_blank">Contact the founder >></a></p>
Lactation Lab<p><a href="https://www.lactationlab.com/" target="_blank">Lactation Lab</a> provides breast milk analysis and personalized recommendations for mothers to optimize their child's health and nutrition. </p><p><a href="https://brdg.app/s/t0173z" target="_blank">Contact the founder >></a></p>
Preveta<p><a href="https://www.preveta.com/" target="_blank">Preveta</a> is transforming cancer care by arming clinicians with data and insights to improve outcomes, and blazing a trail for providers to deliver value-based care.</p><p><a href="https://brdg.app/s/odhs9o" target="_blank">Contact the founder >></a></p>
Shop Latinx<p><a href="https://shoplatinx.com/" target="_blank">Shop LatinX</a> is the leading fashion and beauty lifestyle brand with products designed by and for the Latinx community. </p><p><a href="https://brdg.app/s/0luryb" target="_blank">Contact the founder >></a></p>
Sike Insights<p><a href="https://sikeinsights.com/" target="_blank">Sike Insights</a> powers remote teams to work better together. Our first product, Kona, is an AI-powered Slackbot that helps you communicate. </p><p><a href="https://brdg.app/s/d5ejl2" target="_blank">Contact the founder >></a></p>
StatsHelix<p><a href="http://statshelix.com" target="_blank">StatsHelix</a> is a B2B gametech company focused on esports and streaming. </p><p><a href="https://brdg.app/s/j4yp3j" target="_blank">Contact the founder >></a></p>
Thrive Education<p><a href="https://thrive-education.co/" target="_blank">Thrive Education</a> provides remote tele-assessments for learning differences (LDs) such as dyslexia, ADHD, and autism. </p><p><a href="https://brdg.app/s/1dn2dc" target="_blank">Contact the founder >></a></p>
- New Techstars Anywhere Accelerator Class has LA Company - dot.LA ›
- Here is Techstars' Starburst Space Accelerator Class - dot.LA ›
- Anna Barber Discusses Techstars and the Future of L.A. Tech - dot.LA ›
- Watch Techstars LA's 2020 Class Demo Day - dot.LA ›
LA Tech Updates: Apple Podcast Vet Joins QCODE, Amazon Reportedly in Talks to Buy Wondery, Pharrell's New Black Ambition Incubator
Apple Podcast Veteran Joins Startup QCODE<img lazy-loadable="true" src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yNDUzNTQzMC9vcmlnaW4ucG5nIiwiZXhwaXJlc19hdCI6MTYzNDUzMzYyNH0.pOGV2lL0qOJQDiWw1T5i4SqsGfaL54hLWED6_5Mf1Ww/img.png?width=980" id="8d68d" class="rm-shortcode" data-rm-shortcode-id="f2a47797239f360473fead53338231d4" data-rm-shortcode-name="rebelmouse-image" alt="qcode" />www.sonos.com <p>QCODE, a Los Angeles podcast startup run by a former Creative Artists Agency talent agent, snagged longtime Apple podcast executive Steve Wilson. The 15-year veteran will become QCODE's chief strategy officer.</p> <p>QCODE, which <a href="https://dot.la/sonos-podcast-qcode-2648395035.html" target="_self">last month raised $6.4 million</a> in a Series A round led by Sono, is positioning itself as a funnel for Hollywood. </p> <p>Founded by Rob Herting, a former agent who had represented largely writers and filmmakers, the company has produced eight shows since 2019. Several have been auctioned for film and television, including "Dirty Diana." Amazon picked up the 6-part erotic drama for a TV series.</p>Wilson, who most recently ran marketing for Apple Podcasts, brings insights from the behemoth platform as the industry sees revenues soar. Advertising brought in near $1 billion this year, according to Interactive Advertising Bureau's podcast report prepared by PwC.
Amazon Reportedly in Exclusive Talks to Buy Wondery<img lazy-loadable="true" src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yNDc5NDU5OS9vcmlnaW4uanBnIiwiZXhwaXJlc19hdCI6MTY0MjgyMDY3NX0.BHKSXjwra-gGsFEa7lXCCCMJXWV5cYxrZqhddj3-uds/img.jpg?width=980" id="d401d" class="rm-shortcode" data-rm-shortcode-id="c9c9eee1f9adc4c1d5edeca1af986a84" data-rm-shortcode-name="rebelmouse-image" alt="Hernan Lopez" />Hernan Lopez started Wondery with the belief that in-depth, narrative audio stories were poised to bloom.<p>Amazon is in "exclusive talks" to buy podcast company Wondery and subsume its 30 hit shows and over 8 million monthly listeners into its empire, the Wall Street Journal reported on Wednesday.</p> <p>The talks reportedly value Wondery above $300 million, in line with previous estimates from analysts, when Apple and Sony were said to have expressed interest.</p> <p>Wondery has produced dozens of original series including "Dr. Death" and "Business Wars," and has 19 shows currently in development to become television series. </p> <p>The company does not publicly disclose its financials, but chief executive Hernan Lopez has previously said the company is profitable. About three-quarters of Wondery's revenue comes from advertising, but Lopez has said the company's revenue share from content licensing is growing (Wondery owns the intellectual property for all of its originals). It also launched a subscription service, Wondery Plus, in June and is currently looking to expand its international footprint. </p> <p>Wondery, the West Hollywood-based company with the largest audience of any independent podcast producer, has been the subject of swirling rumors that several suitors are interested in acquiring it.</p> <p>After a pandemic-induced decline that struck much of the podcasting industry, Wondery's audience has surpassed its pre-COVID levels. Its Q3 revenue was about double year-on-year and its Q4 performance has been strong, Lopez previously told dot.LA. </p> <p>Podcasting overall now attracts over 100 million monthly listeners, according to Edison Research. The Interactive Advertising Bureau projects podcasting revenues to exceed $1 billion by 2021.</p> <p>That growth has spurred somewhat of an arms race, most evident in Spotify's spending spree, which also has helped that company diversify from its reliance on streaming. Amazon Music is one of Spotify's biggest competitors along with Apple Music, and <a href="https://www.wsj.com/articles/amazon-music-joins-podcasting-fray-11600261201?mod=article_inline" target="_blank" rel="noopener noreferrer">recently expanded into podcasts as well</a>. </p> <p>Acquiring Wondery would give Amazon more content to slide into Amazon Music, a scaled-down version of which is free for Amazon Prime subscribers. Combining that content with its Alexa smart speaker also could empower the company to capture more eyes and ears in the increasingly competitive attention economy. </p> <p>The talks are reportedly ongoing and no deal has been confirmed. </p>
- Sonos backs LA Podcast Studio QCODE with $6.4M Investment - dot ... ›
- Stem Music Rights Management Software, Raises $10 Million - dot.LA ›