Why One Music Venue Is Taking Their Insurance Company to Court

This is the ninth installment of Rolling Stone’s Music in Crisis series, which looks at how people all across the music industry are coping with the coronavirus pandemic.

Legal battles are brewing between music venues and insurance companies — and Ivy Room is ready to fight. “We’re fighting, fighting, fighting every day to hang in there,” Summer Gerbing, co-owner of the Albany, CA music venue near San Francisco, tells Rolling Stone. As the named plaintiff in a new class action legal complaint, Ivy Room is hoping to represent other California music venues who may have purchased insurance from the defendant, First Mercury Insurance Company.

Gerbing and partner Lani Torres say they’ve paid thousands of dollars for comprehensive, premium insurance to protect themselves from unexpected scenarios of business interruption. They believe that insurance agencies are taking advantage of vague, overarching language that would exclude instances of virus and bacteria, arguing that the magnitude of the current crisis is unprecedented.

In the suit, the club states that on March 25th, First Mercury denied their claim for coverage. “First Mercury took the position that Plaintiff’s claim ‘for business income loss [and/or extra] expense resulting from the closure of the Premises relating to COVID-19 does not arise out of direct physical loss or damage to the covered premises due to a Covered Cause of Loss. To that end, the claim does not indicate that the Premises was physically damaged in any way.'”

“We have not even paid ourselves and made sure that we have done all of the things that were needed of us to keep our business running and to feel safe,” Torres says. “So, when we needed [our insurance], it was just disheartening to find out that it wasn’t there. It’s tough… It’s already a hard business. Summer and I work at other venues to make sure this one runs. We’ve done everything we can and we’ve always paid our bills.”

Gerbing adds that “you pay your payments for business interruption in case something like this does happen where you’re forced to shut down by sheltering in place. And then you get a denial for your claim.” And as their complaint reads, “those denials are often made with little or no investigation and without due regard for the interests of insureds.” (First Mercury Insurance Company did not reply to a request for comment.)

The Bay Area became an early coronavirus hotspot and forced the venue to become one of the nation’s first to close their doors indefinitely in early March. Gerbing and Torres are now approaching their third month of no business. The 200-capacity venue typically has shows seven nights a week and the virus’s impact is emblematic of many clubs nationwide. “This impacts not only on us, but the employees, the fans, everyone who’s been affected by this little club,” Torres says. “Everyone has rallied around the space. The queer community, for one, is huge.”

Nestled in Berkeley’s famously artistic neighborhood near the University of California, the venue quickly became a hidden gem for underplays by major artists, practice gigs, and surprise shows by Jawbreaker, Meat Puppets and members of Green Day. Now, they say they’re worried about how long they can stay afloat. Gerbing and Torres independently own Ivy Room and have been fervent protectors of the venue, which originated in the 1940s, since they set out to acquire and refurbish it in 2011 and re-introduced the public to it almost five years later. “It’s a magical little spot,” Gerbing says. “It’s inviting, comforting, and all-inclusive.” It’s also not part of a chain, and the two owners have no parent company to support them.

They see Ivy Room as a safe, creative space — the suffering of which is as much cultural as it is financial. “We started a GoFundMe page, and that was hard, personally, to do something like that,” says Torres. “But the community has been super supportive and helpful. We’re applying for every loan and grant possible — even loans that don’t necessarily help our model. These small business loans are not one-size-fits-all.” They’ve also joined the 1,400 independent, small music venues fighting alongside a new coalition called The National Independent Venue Association (NIVA) — representatives of which recently told Rolling Stone that 90 percent of its venues do not have cash on hand to last more than six months without federal intervention, while 55 percent say they do not have enough to last more than three months.

According to the duo, the Ivy Room landlord wants to defer their rent, which they say is troublesome for a tiny club that works on small margins. “It would be extremely difficult for us and the majority of all music venues to have that deferment of such a large sum of money,” says Gerbing. “We reopen and of course our capacity is going to be down to 25 percent. And to have that extra deferment payment to be made, plus whatever loan comes upon that… It’s really troubling to think about the future.”

“Unfortunately, exclusions to communicable disease are included on most, including coronavirus,” Cameron Smith, senior vice president for entertainment industry solutions at insurance provider HUB International, told Rolling Stone in March about the various policies that can cover a potential loss of income. (Smith is not affiliated with Ivy Room’s lawsuit.) “That’s not to say there isn’t some rare supplemental coverage or endorsement with some kind of coverage available, but none that I’ve seen. Most property policies will have a Virus or Bacteria Exclusion, which would apply when a venue is closed for a period of time because of the outbreak (or required to close by a civil authority),” he said. “The resulting Business Income loss suffered due to the outbreak (or threat of) would be excluded.”

Andre Mura, a partner at Gibbs Law Group LLP that is representing the Ivy Room along with D.C.-based Cohen Milstein Sellers & Toll PLLC, agrees that Smith’s comments reflect what First Mercury Insurance Company is saying publicly: that there isn’t coverage here, and to the extent that there is, that coverage is excluded by language that discusses viruses. “We disagree with that broad reading of the policies,” Mura tells Rolling Stone. “Ordinarily, exclusions are read narrowly, and it’s the obligation of the insurer to prove the applicability of those exclusions. But this is essentially what this legal fight is going to be about — whether there’s going to be business interruption insurance coverage.

“Many businesses throughout the United States that see premiums for such coverage were responsible in obtaining that insurance and now are faced with a serious business interruption,” he says. “They’re looking to insurance coverage as a lifeline, and insurance companies are pretty uniformly denying that coverage — often providing very cursory reasons for that denial. That has prompted a wave of lawsuits from a variety of businesses. This class action lawsuit is on behalf of music venues.”