Hoping for Relief for Venues, Ivy Room Spearheads Class Action Against Insurer

The owners of Albany venue Ivy Room believe their business interruption insurance should cover them during the pandemic. They hope other California music venues will join their fight against First Mercury Insurance, which categorically denied their claims. (Kelly Sullivan/Ivy Room)

Since taking over the Ivy Room in 2015, Lani Torres and Summer Gerbing have prided themselves on doing everything right. Transforming the venerable Albany dive bar into one of the East Bay’s liveliest music venues, they cultivated a devoted clientele with an exuberantly eclectic roster of acts. They’ve covered their bills, paid the artists who drew throngs to the intimate club and kept up insurance payments in case anything went wrong.

So when the spread of COVID-19 led to the Bay Area’s March 17 shelter-in-place order and the Ivy Room shut its doors, they figured their business interruption insurance would help the club weather the storm. But their insurer, First Mercury, denied their claim, putting the Ivy Room in the same boat as hundreds of other venues that have filed claims with their insurers. Last Wednesday, the owners struck back, filing a class action lawsuit on behalf of California-based music venues insured by First Mercury.

Despite collecting premiums for such risks, First Mercury is “categorically denying claims from venues arising from California’s mandated interruption of business services,” according to a complaint filed by Oakland-based Gibbs Law Group and Washington D.C. firm Cohen Milstein Sellers & Toll PLLC. Rather than investigating individual claims, First Mercury has responded with form letters denying coverage that, the suit argues, “appear to rest on crabbed readings of coverage language and overbroad readings of exclusions. That gets insurance law exactly backwards—and raises the specter of bad-faith denials.”

Chris Bauermeister of Jawbreaker at the Ivy Room in Albany, Aug. 3, 2017.
Chris Bauermeister of Jawbreaker at the Ivy Room in Albany, Aug. 3, 2017. (Gabe Meline/KQED)

First Mercury, which is based in Southfield, Michigan, could not be reached for a response. The National Association of Insurance Commissioners, the U.S. standard-setting and regulatory support organization governed by all 50 states’ chief insurance regulators, released a statement in March stating that “business interruption policies were generally not designed or priced to provide coverage against communicable diseases, such as COVID-19, and therefore include exclusions for that risk.”

David Sampson, president and CEO of the American Property Casualty Insurance Association, said that insurance companies started excluding coverage for loses from viruses, bacteria and contaminations after the 2003 SARS outbreak. “Only the federal government can be the full bridge for a crisis of today’s proportion,” Sampson said. “The proof is in the numbers—this pandemic is unprecedented in its scale, reach and economic impact.”

Two women pose in front of a bar.
Ivy Room owners Summer Gerbing and Lani Torres (left to right). (The Ivy Room)

For Torres and Gerbing, the claim denial raises questions about the point of a business interruption policy, and they’re hoping to rally fellow club owners with the class action suit. “We all are extremely frustrated with this situation,” Torres said. “All the other club owners at their wits’ end. We pay so much money and this kind of situation is what we were paying for.”

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“At times we would pay our insurance and sometimes not pay ourselves,” Gerbing added. “When we filed we were quite shocked we got a denial. We are part of a lot of discussions going on nationally with other venue owners, trying to understand how to deal with all of these clubs having business interruption insurance and not being able to use it.”

The Ivy Room has been a mainstay of the East Bay music scene since the 1940s. It mostly featured blues and rock acts during its turn-of-the-century heyday. Under Torres and Gerbing, the cozy venue became a magnet for creative programming with multi-act themed nights that attracted audiences spilling out onto San Pablo Avenue. Jawbreaker and members of Green Day have performed rare, intimate shows there in recent years. And in 2019, the alt-country combo Crying Time presented a sold-out tribute to country music legend George Jones that the band ended up bringing to Berkeley’s much larger Freight & Salvage.

With bills mounting and no end in sight to the shelter-in-place order, Torres and Gerbing reluctantly launched a GoFundMe campaign in late April to save the Ivy Room. The response was gratifying. So far fans of the venue have contributed over half of the $50,000 target. Rather than waiting for insurance or small business loans, many venues have turned to similar crowdfunding efforts hoping to survive long enough to reopen. And the Ivy Room recently joined a cadre of venues across the country in the newly formed National Independent Venue Association, which seeks to lobby Congress for relief measures.

But Torres and Gerbing are let questioning what happens until California reaches phase four of its shelter-in-place orders, which stipulate that concerts can only take place when a COVID-19 vaccine or therapeutics have been developed.

“We are one of those shoulder-to-shoulder, everyone’s sweating kind of clubs,” Torres said. “With social distancing maybe we could open at 25% capacity. The next step would be to see what adding tables would look like. It’s all really uncertain.”

In the meantime, Gibbs Law Group is actively seeking other clubs and venues to join the class action.

“We’ve heard from many different businesses with claims denied despite having premiums in place to protect them,” said Gibbs Law Group attorney Andre Mura. “Many denial letters are pretty barebones. Music venues, restaurants and all sorts of businesses that are acting responsibly following shutdown orders have claims that have been denied. It’s really a widespread problem tearing at the fabric of our communities, with many small, culturally important businesses finding themselves in dire straits through no fault of their own.”