Houston Restaurant Owner files Lawsuit over Covid Lockdown Claims

(April 30, 2020) A prominent Houston restaurant owner has filed an insurance lawsuit for business losses caused by the Covid-19 lockdown. Russell Ybarra filed suit yesterday for revenue losses several of his businesses have suffered as a result of the ongoing pandemic. Mr. Ybarra owns and operates Gringo’s Mexican Kitchen and other local Tex-Mex chains.

YBarra Investments — which also owns Jimmy Changas and The Lunch Box — has sued Scottsdale Insurance Company for more than $1 million overbusiness losses sustained during the crisis. YBarra’s portfolio also includes Bullrito’s and Burger Libre.

Gringo’s, which first opened a restaurant in Pearland, is known by locals for favorites such as seafood enchiladas, fajita bowls, and myriad margaritas. Jimmy Changas has, for many years, been a popular destination for families, with locations that feature Jimmy’s Jungle playgrounds and “Little Jimmy’s” menus.

Harris County District Court Filing

Filed in Harris County District Court, the complaint focuses on YBarra’s business interruption insurance policy language, with its virus and bacteria exclusion. An insurance agent in Sugar Land who sold the policy to Ybarra Investments is also named as a defendant in the suit.

The complaint states in part:

“The ambiguous ‘virus and bacteria’ exclusion in the Scottsdale policy does not refer to pandemics,” … “Despite their experience with coverage during SARS and H1N1, neither Scottsdale Insurance Company nor agent Terry Slater advised YBarra that coverage would be denied from the loss and damage caused by a virus pandemic outside the insured properties.”

Stay at Home Order triggered Coverage, says Complaint

The complaint also claims YBarra was denied coverage written into the policy’s “civil authority” clause that protects business for income losses and extra expenses caused by the actions of a civil authority that bans access to the insured’s premises. Harris County Judge Lina Hidalgo issued a “stay at home, work safe” order on March 24. That order, which is set to run through the end of April 2020, required all “nonessential” businesses such as restaurants to close.

Mr. Ybarra has been a vocal critic of that order. He wrote through his Twitter account: “This shutdown is an unequal opportunity destroyer of businesses and families alike. If the suffering of the shutdown were truly equal for all Americans, then the economy would have opened already.”

President of the Houston Restaurant Association, attorney Al Flores — who also represents Mr. Ybarra’s properties — issued a statement: “Restaurant owners have been paying for this coverage for decades, and the one time they truly need this assistance, they get a boilerplate denial letter from their insurance company.”

Ambiguous Language favors Insured, says Attorney

“Mr. Ybarra has paid insurance premiums for business interruption for many years,” said Houston attorney David Matthews of Matthews & Associates, who also represents the restaurant owner in the suit. The policy gives the buyer the appearance of coverage while giving the insurance company a potential out, or at least a potential legal argument for one. There are many ambiguities in this business interruption insurance policy, and the law is clear that ambiguities should favor the insured because the insured did not write the policy.  We buy insurance policies for catastrophes, and this is one of them.”

May 1 Re-opening Planned

Mr. Ybarra plans to re-open his restaurants on May 1, 2020, the date when Texas Governor Greg Abbott’s statewide executive order allowing restaurants to reopen goes into effect.