Articles Posted in Coronavirus

Coronavirus alerts for hoteliers

Published on:

13 May 2020

Click here to see How JMBM’s Global Hospitality Group® can help you, here for the latest articles on the coronavirus and here for the latest materials on loan modifications, workouts, bankruptcies and receiverships.

COVID: First of kind Wisconsin Supreme Court decision strikes down state’s stay-at-home order by vote of 4 to 3

Wisconsin Governor Tony Evers issued his stay-at-home order for nonessential businesses on March 18. On April 16, he extended the order until May 26. Reports say that the governor declined to negotiate with legislators two weeks ago on a compromise to the terms of the restrictive order, preferring to see what the court decided.

It was a winner-take-all decision. This evening, that order was invalidated and the court refused the state’s request for a six-day stay to allow GOP lawmakers and the governors to work out new rules. As a result, all state restrictions are now removed on social gatherings or business.

After a 90-minute online video conference hearing before the Wisconsin Supreme Court last week, the court today issued a decision striking down the governor’s order.

The court ruled that the government exceeded the statutory authority granted during an emergency, characterizing the order as “confining all people to their homes, forbidding travel and closing businesses.”

Justice Rebecca Bradley was one of the concurring justices. During oral arguments last week, she asked the attorneys defending Andrea Palm, Wisconsin’s top health official the following question:

Isn’t it the very definition of tyranny for one person to order people to be imprisoned for going to work, among other ordinarily lawful activities?

The state argued that the legislature gave the health department officials such power, and said people will die if the court strikes down the order. CONTINUE READING →

Published on:

30 April 2020

See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on the coronavirus.

Note: If you are an individual consumer with coronavirus-related travel issues, please do NOT contact us! We do not represent individual consumers. We advise businesses on major contracts, investments and financing. 

Hotels have seen substantial losses in revenue in the wake of the coronavirus, and face the uncertainty of an economy which may take months or years to recover. For many, insurance payments may assist in keeping their business afloat, but few hotel owners or lenders are making claims. JMBM partner Guy Maisnik explains how some hotels may qualify for Business Interruption insurance coverage for COVID-19.

– Jim

Business Interruption Insurance may cover hotel losses
from COVID-19 shelter with judicial claims

Many coverage exclusions focus on disease, not government shelter orders

by
Guy Maisnik

Hotel owners and underwriters have seen the economic prognosis for hotels for the next twelve to twenty-four months, and it does not look good. Modern America 2.0 will not be the America of January 2020 for a long time.

The “V” uptick in the U.S. and world economy will come when the world can pass the “middle aisle test,” as in when will you comfortably: 1) take the middle seat in public transportation and travel; 2) sit on a bar stool or restaurant counter between two others; and 3) attend sports or entertainment events or other public gatherings. Until then, the bottom of the economic “U” may feel like an eternity.

A mistake not to pursue claims

So, what does this have to do with insurance? Everything. Because insurance payments might sustain your business until your guests can pass the middle aisle test. By now, you have read a number of articles written by lawyers and consultants on business interruption insurance – some more measured and analytical and others more aggressive.

Many hotel owners (or their lenders, surprisingly) are not bothering to make insurance claims at the advice of their insurance agents or counsel. These advisors believe there is a low likelihood of making a successful claim based on the 2006 Insurance Services Office (ISO) circular – Form CP 01 40 07 06, which excludes from coverage the loss or damage caused by “virus, bacteriaum or other micororganism that induces or is capable or inducing physical distress, illness or disease.”

In our view, this is a mistake. We believe hotel owners and capital providers should carefully review their insurance policies and coordinate with their consultants, lawyers and brokers to determine whether an aggressive approach is possible.

Policy exclusions are narrowly construed

First, all business interruption insurance policies are not the same. A sophisticated buyer of insurance services – and its legal counsel – will have their policies carefully analyzed. Depending on the policy and applicable law, there can be meritorious arguments in support of coverage, even if a hotel is open and operating.

Second, history and case law are replete with apparently so-called airtight policy exclusions only to find a court holding an insurer liable for coverage. Katrina is the most notable example, with insurers paying out approximately $900 million in coverage notwithstanding flood exclusions. Recently, the Seventh Circuit held that a manufacturer’s insurer must cover its insured, a designer and builder of anaerobic digesters, under its errors and omissions policy for claims alleging breach of contract, despite an express exclusion in the policy for claims arising out of a breach of contract. Similarly, the Ninth Circuit held that a war exclusion did not apply when an entertainment production company incurred damages as a result of Hamas rocket attacks.

The point is that insureds who purchased business interruption insurance and paid expensive policy premiums, should strongly consider pursuing coverage, even if not apparent under the precise language of a policy, particularly taking into account the policy terms, applicable law – both case and statutory – and prior judicial decisions.

The case for income loss coverage

The coronavirus pandemic caused states, cities and counties throughout the U.S. to impose social distancing measures in the form of stay at home, shelter in place and other executive type orders, and required businesses to close and remain closed until otherwise directed. Excluded from such orders were so-called essential businesses, which often included hotels. Regardless of whether a hotel is open or not, such closure and limited closure requirements seriously crippled virtually all hotel revenue demand drivers (i.e., businesses, restaurants, entertainment venues, schools, and so forth). This has had led to disastrous consequences for hotel businesses, severely reducing demand, disrupting operations and supply chains, causing a loss of income. The income losses will extend well beyond the date such orders are removed.

Hotels are suffering damages in a variety of ways as a result of COVID-19 and the shelter orders, most notably income loss, fixed expenses during partial or total closure, structure contamination, reputation damages and third-party claims.

Insurers will aggressively defend

True, there are hurdles to overcome. Given the state of the insurance industry and the large number of claims being made, it is unlikely that your insurance company will simply roll over and write a check. The insurer’s first (and not only) defense will likely be “virus, bacteriaum or other micororganism” exclusion from coverage under its policy, and that further the 2006 circular specifically addresses loss of business income. Hotel policies may also explicitly exclude coverage for property damage and loss resulting from viral and bacterial contaminants such as SARS, MERS, avian flu and the coronavirus. Insurers may even bring their own claim in a separate suit for declaratory relief that there was not an insurable event, which under a business interruption policy is generally defined as a direct physical loss or damage. Regardless, courts may well determine that business interruption and losses were caused by governmental order and not a viral pandemic.

CONTINUE READING →

Published on:

01 April 2020
Click here for the latest articles on Labor & Employment.
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Note: If you are an individual consumer with coronavirus-related travel issues, please do NOT contact us! We do not represent individual consumers. We advise businesses on major contracts, investments and financing. 

Following the enactment of the Families First Coronavirus Response Act on March 18, 2020, the Department of Labor has clarified which employers will be impacted by the Act and how they can comply with its mandates. Marta Fernandez, hotel lawyer and a partner in JMBM’s Labor & Employment department, has answered some of the most frequently asked questions by employers about the Act which goes into effect on April 1, 2020.
What hotel owners and operators need to know
about employee rights under the FFCRA

by
Marta Fernandez

Frequently Asked Questions or FAQs about employee rights under the Families First Coronavirus Response Act

Effective April 1, 2020 and continuing through December 31, 2020, covered employers need to begin complying with the mandates of the Families First Coronavirus Response Act (“FFCRA” or “Act”). You can find our original article explaining the FFCRA here. Since the law’s enactment on March 18, 2020, the Department of Labor has clarified and expanded upon what precisely is required under the Act and of whom it is required. Below are some of the questions we have been receiving from clients. The answers provided reiterate some of the previously announced requirements, and incorporate the additional guidance that has been issued by the Department.

#1 What obligations do covered employers have under the FFCRA?

Covered employers must provide eligible employees with up to 80 hours of emergency paid sick leave and up to 12 weeks of emergency family and medical leave.

#2 When is an employee eligible to receive paid sick leave under the FFCRA?

Under the FFCRA, a full-time employee may qualify for 80 hours of paid sick leave (or, for a part-time employee – the average number of hours that the employee works over a typical two-week period) where the employee is unable to work, or telework, due to a need for leave because the employee:

  1. Is subject to a federal, state, or local quarantine or isolation order related to COVID-19;
  2. Has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
  3. Is experiencing COVID-19 symptoms and is seeking a medical diagnosis;
  4. Is caring for an individual subject to an order described in (1) or self-quarantine as described in (2);
  5. Is caring for a child whose school or place of care is closed (or child care provider is unavailable) for reasons related to COVID-19; or
  6. Is experiencing any other substantially-similar condition specified by the Secretary of Health and Human Services, in consultation with the Secretaries of Labor and Treasury.

#3 How much compensation is an employee entitled to receive under the paid sick leave provisions of the FFCRA?

Employees taking leave for reasons 1, 2, or 3, noted above must be paid at either their regular rate or the applicable minimum wage, whichever is higher, with a cap of $511 per day and $5,110 in the aggregate.

Employees taking leave for reasons 4, 5, or 6 above must be paid at two-thirds their regular rate or two-thirds the applicable minimum wage, whichever is higher, with a cap of $200 per day and $2,000 in the aggregate.

The Department has now clarified that an employee’s regular rate of pay is the average of the employee’s regular rate over a period of six months prior to the date on which he or she takes leave.

#4 Can I require employees to substitute any accrued paid time off for the emergency paid sick leave?

No. While employees may elect to substitute any accrued vacation leave, personal leave, or medical or sick leave for the emergency paid sick leave, you cannot require employees to do so.

#5 What if I’ve already provided my employees with paid leave for a COVID-19 related reason?

The emergency paid sick leave is to be provided in addition to any other paid leave that an employer has already provided to its employees. Thus, leave taken prior to April 1st does not count towards the leave required under the Act.

CONTINUE READING →

Published on:

26 March 2020

See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on the coronavirus.

Please join me and my esteemed co-panelists for an online presentation sponsored by NEXT Events and ICD Publications, titled “Hospitality in the Time of Coronavirus: Solutions for Our Industry.” The program will take place online on Thursday, April 2nd, from 2:00 PM EST – 3:00 PM EST.

The panel discussion will be followed by a question-and-answer period. Online participants will be invited to submit questions online.

Moderated by my friend, Christina Trauthwein, Editor-in-Chief at Hotel Business, the panelists include:

  • Jim Butler, Partner, Chairman, JMBM’s Global Hospitality Group®, represents hotel owners, developers and lenders.
  • Chip Rogers, President/CEO, American Hotel & Lodging Association (AHLA), previously served as the President and CEO of the Asian American Hotel Owners Association (AAHOA)— the largest U.S. hotel owners association.
  • Jamie Lane, Senior Managing Economist of Econometric Advisors and CBRE Hotels Americas, manages CBRE’s team of economists for all property types and specializes in forecasting of the hospitality industry.
  • Melissa DiGianfilippo, Co-founder/President of public relations, Serendipit Consulting, spearheads public relations and communications efforts, leading to positive press coverage across international, national and local media outlets.

Harry Spirides, President, Spirides Hospitality Finance Company, specializes in providing financing to hotel owners and developers for hotel development, acquisition and debt refinancing projects.
Register Now
Register here with a $25 suggested donation benefiting Hospitality Cares.

All proceeds of the program will benefit Hospitality Cares’ Coronavirus Fund with a $5,000 matching donation from NEXT Events.

CONTINUE READING →

Published on:

19 March 2020
Click here for the latest articles on Labor & Employment.
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With hour-by-hour developments, here is an update on yesterday’s Labor & Employment blog post.
Labor Lawyer COVID-19 Update: Family First Act
signed by President Trump 

(Family First Coronavirus Response Act)
by
Marta Fernandez

As we expected, the federal government will provide additional sick leave relief and paid child care leave for employees; in anticipation of things to come, California will ease employers’ mass layoff notice requirements.

Families First Coronavirus Response Act

Yesterday, March 18, President Trump signed the Families First Coronavirus Response Act, the legislature’s response to the COVID-19 health crisis. Private employers with fewer than 500 employees and all government employers must be ready to offer emergency family and medical leave and emergency paid sick leave to eligible employees. Additional information and further clarification on these sweeping provisions will likely be provided in the coming days through federal guidance. This program will become effective within 15 days after its enactment by President Trump and is set to expire on December 31, 2020.

Emergency Paid Sick Leave

The paid sick leave portion of the Act requires covered employers to provide all employees who cannot work or telework due to COVID-19 related circumstances, with up to 80 hours of paid sick time, prorated for part-time employees. Employees are eligible if they meet any one of the following circumstances:

    1. The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19.
    2. The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19.
    3. The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis.
    4. The employee is caring for an individual who is subject to an order as described in subparagraph (1) or has been advised as described in paragraph (2).
    5. The employee is caring for a son or daughter if the school or place of care of the son or daughter has been closed, or the child care provider of the son or daughter is unavailable, due to COVID-19 precautions.
    6. The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.

If an employee is taking the leave for any one of the first three reasons listed above, the employee must be compensated at the higher of his or her regular rate, the federal minimum wage, or the local minimum wage. If an employee is taking the leave for one of the three subsequent reasons listed above, the employee must be paid two-thirds of the rate he or she would otherwise receive. This paid leave is separate and above any existing sick leave entitlements that employees may already have. CONTINUE READING →

Published on:

18 March 2020
Click here for the latest articles on Labor & Employment.
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As the Coronavirus Pandemic continues to impact California businesses, many employers are wondering how best to ensure the wellbeing of their staff. Marta Fernandez, hotel lawyer and partner in JMBM’s Labor & Employment department, discusses some of the key issues raised by employers and provides recommendations for complying with new mandates.
COVID-19: Immediate Advice For California Employers
Top 7 Frequently Asked Questions
by
Marta Fernandez

Most California employers are taking steps to keep employees safe during the Coronavirus Pandemic. These changes to workplace routines, policies and norms are the result of a mix of proactive steps, changes in demand, and government mandates. As labor and employment lawyers, our phones have been ringing off the hook. Here are the Top 7 most frequently asked questions by employers trying to ensure the health and safety of their workforce.

CONTINUE READING →

Published on:

17 March 2020

See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on distressed hotel loans, here for The Lenders Handbook for Troubled Hotels, and here for articles on the coronavirus.

 

Hotel owners, operators and lenders are under stress – hotel defaults, layoffs, and shutdowns loom. Prompt action is critical.

For the last three to five years the pundits have increasingly speculated that the longest economic recovery in history could not endure and that we were due for a recession. We hope that the extraordinary measures being taken now may defer some of the worst fears, but clearly the US economy has been plunged into distress, and the pain is particularly acute in hotels, restaurants and related travel and tourism businesses.

The shelter at home edits of the Federal, state and local governments are literally requesting that people stay at home for the next two weeks. Many hotels have plunged into single-digit occupancies and slashed revenues to cover fixed and operating expenses. Restaurants struggle to see if they can survive on takeout and delivery services alone. Furloughs and layoffs are imminent.

Lenders and borrowers alike are seeking relief, clarity, and resolution. It feels like some blend of the 1990s and 2008. And it is time to go back to the basics or distressed loans: Quick assessment, preparation of plans, transparency, communication, and cooperation for mutual benefit.

The lawyers who comprise JMBM’s Global Hospitality Group® have extensive experience and resources that can help hotel stakeholders answer these questions. The issues involved are too numerous to address in one article, and the answers will vary widely depending on each hotel asset and how it is structured.

Today’s article will address how the “structure” of hotel ownership and operations impact the interests of the various stakeholders.

  
Coronavirus: Creative strategies to mitigate financial impact
Loan defaults, lender rights & recapitalizations
by
Jim Butler and Guy Maisnik
JMBM’s Global Hospitality Group®

 

Facing the realities of low hotel occupancy and dwindling operating revenue

Lenders, equity providers, borrowers and operators are facing hard realities regarding the performance of their hospitality assets due to the Covid-19 pandemic.

What are the parties’ rights? What remedies can be pursued? What is the best approach for both the short term and the long term?

Understanding the structure of the hotel asset will help stakeholders answer these difficult questions.

The “operating business” is key

It is often said that hotels are a special real estate asset with an operating business. It really is the other way around: hotels should be thought of as a unique operating business first, within special purpose real estate. This is true not just for hotels, but for assets like timeshares, casinos, gasoline stations, movie theaters, and restaurants. The operating business comprises a large component of the asset’s value.

It is also the operating business that raises thorny problems when cash flow drops dramatically due to matters outside the control of any party – such as a global pandemic or a declaration of national emergency.

Identify and work with all stakeholders

It would be a serious mistake for any stakeholder to believe it holds all the cards in directing the final outcome on asset direction following a calamity. CONTINUE READING →

Published on:

16 March 2020

See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on the coronavirus and here for the latest on force majeure.

Note: If you are an individual consumer with coronavirus-related travel issues, please do NOT contact us! We do not represent individual consumers. We advise businesses on major contracts, investments and financing. 

On Sunday, my local Starbucks had no tables or chairs inside or outside. It has gone to “Grab n Go” service only. You cannot sit and drink your coffee or eat your muffin. This is the harbinger of things happening right now!

Hotel Lawyer: SF orders businesses to close and residents to stay at home

San Francisco became the first major U.S. city to order most non-essential businesses to close and all residents to stay at home except for essential needs.

The order, announced by Mayor London Breed on Twitter Monday, begins at midnight. Ms. Breed said that “necessary government functions” and “essential stores” will remain open.

Click here to see the official Order of the City of San Francisco.

It has been reported that six San Francisco Bay Area counties have asked residents to stay at home, and similarly ordered the closing of non-essential businesses, excluding banks, restaurants (for pick up or delivery only), health facilities and the like.

CDC, California State and local government action

On Sunday, March 15, 2020, the CDC issued new guidance for large events and mass gatherings as follows: CONTINUE READING →

Published on:

5 March 2020

See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on the coronavirus and here for the latest on force majeure.

Note: If you are an individual consumer with coronavirus-related travel issues, please do NOT contact us! We do not represent individual consumers. We advise businesses on major contracts, investments and financing. 

Coronavirus issues are likely to affect every business and industry, and the hotel industry is looking at an immediate and out-sized impact. JMBM partner Mark Adams deals with these issues across all industries on an international basis, and he has a deep involvement and understanding of the hospitality industry’s unique contracts, issues, customs and practices. In the second of his series of articles regarding the coronavirus, Mark discusses the importance of jurisdiction and contract wording when considering force majeure as a defense.
Coronavirus COVID-19 force majeure:
Contract provisions and governing law are important
by
Mark Adams

Force majeure provides an excuse for a party’s non-performance of its contractual obligations as a result of an extraordinary event or circumstance beyond the control of the parties, such as act of God, war, strike, riot, etc.

What law governs the contract? Common law or civil law principles?

Unless there is an express provision in the contract, force majeure does not exist as a standalone defense in common law jurisdictions such as the U.S. and the U.K. In civil law jurisdictions, such as France and Germany, however, force majeure is implied into every contract, unless the parties agree otherwise. In order to minimize unintended consequences, contracting parties in both jurisdictions include force majeure provisions in their agreements.

In common law jurisdictions, the general rule is strict liability for the breach of a contract. This reflects the principle of pacta sunt servanda (preserving the sanctity of the contract). But there are exceptions. Common law jurisdictions excuse performance when it is not practical and could only be done at excessive and unreasonable cost. In the U.S., the Restatement (Second) of Contracts § 261 (1981), states:

“Where, after a contract is made, a party’s performance is made impracticable without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his duty to render that performance is discharged, unless the language or the circumstances indicate the contrary.”

In the U.K., the similar doctrine of “frustration of purpose” is likewise a defense to non-performance. Frustration of purpose occurs when an unforeseen event undermines a party’s principal purpose for entering into a contract such that the performance of the contract is radically different from performance of the contract that was originally contemplated by both parties. Whether under an “impracticable” or “frustration” jurisdiction, the standard for relief is a high one, and is subjective. That subjectivity can only be definitively resolved by litigation and judicial intervention.

Specify conditions short of “impracticable”

To avoid the uncertainty of such subjective standards, contracting parties in common law jurisdictions typically include force majeure provisions to specify events or circumstances that will excuse performance of contractual obligations by a party. Such specified force majeure events might not rise to the level of “impracticable” or “frustration.” By negotiating force majeure provisions, the parties can better allocate the consequences of non-performance as between themselves. For example, in a supply contract for the purchase of medical grade masks, if the manufacturer/seller is suddenly unable to timely deliver the masks to the buyer because of a trucking strike, the manufacturer could suffer the consequences of the substantially increased costs of delivering the masks by a private carrier. So long as the delivery costs are not prohibitively higher, the manufacturer will be liable for breach of contract if the manufacturer does not perform.

The doctrines of “impracticable” or “frustration” are of no avail in these circumstances. And even if they might be available, the application of them would have to be litigated. But if a properly worded force majeure provision is in the contract it could excuse performance in the event of trucking strikes, and the manufacturer would be off the hook. CONTINUE READING →

Published on:

3 March 2020

See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on the coronavirus and here for the latest on force majeure.

Note: If you are an individual consumer with coronavirus-related travel issues, please do NOT contact us! We do not represent individual consumers. We advise businesses on major contracts, investments and financing. 

In the article below, JMBM partner Mark Adams discusses the coronavirus in relation to force majeure provisions in contracts. This legal concept goes back centuries, but has become increasingly relevant as COVID-19 may be advanced by many in the coming days as a defense to breach of contract. This article is one of a series which will discuss the principles of force majeure and the commercial implications of the coronavirus.

We start with a brief explanation of the concept and trace its roots.
COVID-19 coronavirus as a force majeure defense to contractual non-performance
by
Mark Adams

One often doesn’t know the extent of one’s insurance coverage until a calamity occurs. So it is with force majeure provisions in contracts.

Typically, force majeure provisions are included in contracts to excuse a party from contractual obligations if some unforeseen event beyond its control prevents performance of its contractual obligations.

As of March 2, 2020, there have been 88,948 confirmed cases of this strain of the coronavirus (COVID-19) in 64 countries with 3,043 confirmed deaths. The first reported case of COVID-19 was just over two months ago on December 31, 2019 from Wuhan, China. The effects of this coronavirus have already prevented or delayed performance in countless agreements in numerous industries causing widespread commercial loss and business interruption. It is likely that travel restrictions, worker shortages, immigration quarantines, supply-chain disruptions, and event cancellations will worsen before they begin to recover. And now, those affected are dusting off their agreements to examine their force majeure provisions and determine whether they might cover a coronavirus event.

The concept of force majeure (meaning superior force) originated in the Napoleonic Code of 1804. The breaching party to an agreement was condemned unless their non-performance or delay in performance resulted from a cause that could not be imputed to them, and by a cause of a superior force or of a fortuitous occurrence. Today, most tribunals, both in common law and civil law systems, recognize that contractual performance that becomes impossible or commercially impracticable under certain contexts may be excused. That said, the words in the parties’ force majeure provision controls, and that provision is deemed to be the parties’ negotiated allocation of who bears the risks of particular catastrophic events as between them. CONTINUE READING →

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