Century 21 has 13 stores mostly in New York City and the surrounding metropolitan area. As of Thursday, it had 1,400 employees. The company blamed the lack of payment on its business interruption insurance as the cause of its demise.
But Century 21 said the final straw was the fact that it did not get $175 million it had filed for under its business interruption insurance for the revenue it lost when pandemic forced store closures. It said similar insurance payments saved it 19 years ago in the wake of the September 11 terrorist attacks — it had a store directly across the street from the World Trade Center, which was destroyed. But the company said it has not been able to get payments this time.
“We now have no viable alternative but to begin the closure of our beloved family business because our insurers, to whom we have paid significant premiums every year for protection against unforeseen circumstances like we are experiencing today, have turned their backs on us at this most critical time,” said Century 21 co-CEO Raymond Gindi.
“While retailers across the board have suffered greatly due to Covid-19 … we are confident that had we received any meaningful portion of the insurance proceeds, we would have been able to save thousands of jobs and weather the storm.”
But Michael Barry, spokesman for the industry trade group Insurance Information Institute, an industry trade group, said most business interruption insurance policies do not cover the losses from pandemic-forced shutdowns earlier this year.
There typically must be direct physical damage to a company’s place of business for these policies, also known as “business income policies,” to pay a claim for lost revenue, he said.
“There are a number of businesses nationwide who are suing their insurers, believing the a business interruption policy pays out when there is no direct physical damage,” he said, adding that ccourts have been upholding insurer’s arguments. “In order to have the resources to pay their legitimate claims, insurers must deny ones in which they are not an obligation to pay.”
Barry estimates that only 35% to 40% of policies written to medium sized businesses and larger have business interruption insurance. But he said almost all have the same exclusions.
“To sell a policy that covers everything would be prohibitively expensive to the point where no one would even buy one,” he said.