David George-Cosh

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Restaurants that are already struggling to survive amid a steep downturn in sales during the pandemic are facing an unlikely final straw that threatens to shut their doors: insurance. 

Rising premiums, losing coverage, or getting none at all are putting restaurants across the country at risk and represent the latest blow to a battered sector already beset by indoor dining restrictions, high fees for delivery services, and shifting consumer habits as a result of COVID-19.

For Toronto-based restauranteur Hemant Bhagwani, a 40 per cent hike in insurance premiums across some of his 29 Indo-Canadian restaurants in Ontario has resulted in thousands of dollars in additional fees while he faces sales at a fraction of pre-pandemic levels. As well, insurers are removing clauses that previously covered any losses incurred from pandemic-related closures or lockdowns, he added. 

"2019 was the biggest year of my life in terms of profits, but 2020 suddenly seems to be taking me to a point where I don't think there's anything left in the industry for me anymore," Bhagwani said in a phone interview with BNN Bloomberg. 

Roger Yang, who owns a pair of restaurants in downtown Toronto, said he received a letter from his insurance broker on Tuesday announcing it would no longer provide coverage for the restaurant industry. If Yang wants to find a new insurer, he expects to pay substantially more than his current $3,000 annual rate.

"What's puzzling to me is how we keep paying money every year but we don't get anything out of it," Yang said, adding he hasn't made an insurance claim in 20 years of running restaurants. "The whole industry is a money grab."

Restaurant insurance typically covers adverse events such as property damage or injury that may be a result of accidents. It also helps cover product liabilities, which protects owners from claims stemming from food-borne illnesses, as well as various employee-related issues such as benefit errors, discrimination, or harassment.

Meanwhile, Sarah Paterson has gone through four insurance brokers since May trying to find someone to provide coverage for a restaurant that she wants to open in Cobalt, Ont. So far, she's been unsuccessful in getting the coverage she needs to open the town's sole restaurant. 

"Everybody's telling me the doors are shut," Paterson said in a phone interview. "There's no market for you ... I am stuck in this Catch-22. You have to have it but no one has to provide it.

A senior government official told BNN Bloomberg that Queen's Park has been discussing ways to improve commercial insurance, which includes coverage for restaurants, with various insurers over the past six to eight weeks and noted that what worked prior to the pandemic is clearly not working right now. 

While it's unlikely to see the Ontario government include any further measures to regulate the commercial insurance industry in its upcoming fiscal budget, one of the possible solutions could be a rebate similar to what auto insurers gave drivers for driving less during the onset of the pandemic, the official said. 

Finance Minister Rod Phillips said in an emailed response to BNN Bloomberg that he "expects to see a solution within days, not weeks" from the insurance industry to better serve businesses who have seen their coverage recently hiked or lost during the pandemic. 

Earlier this week, Ontario Premier Doug Ford expressed his frustration with the insurance industry after hearing reports of insurers refusing to provide coverage to businesses across several sectors. 

"I'm fed up with these guys," Ford said during a news conference. "These people have made a fortune over all these years, and I've just had it with these insurance companies. They need to come to the table [and] start supporting people."

Steve Kee, a spokesperson for the Insurance Bureau of Canada, told BNN Bloomberg in an email that insurers have already provided $298 million in commercial relief, 85 per cent of which went to small and medium-sized businesses. Some of that relief includes premium adjustments, coverage extensions, and payment deferrals on a case-by-case basis. 

"Claims costs for commercial insurance were increasing across a number of sectors prior to the outbreak of the COVID-19 pandemic," Kee said. "The pandemic has compounded the existing insurance industry challenges and put further strain on the affordability and availability of insurance."

While Bhagwani is still considering his options, he's concerned that the hike in insurance rates could be the death knell for many independently-owned restaurants, leaving the market mainly for bigger, well-capitalized outlets. 

"I've had a very good run, but right now it's very scary," he said. "It's just about sustaining and surviving right now."