Associated Food Dealers of Mich. Say Companies Are Balking at Blackout Claims

Michael Sarafa, president of the Associated Food Dealers of Michigan, is reportedly calling on Michigan’s Office of Financial and Insurance Services (OFIS) and the State Legislature to look into practices of insurance companies in the aftermath of the Blackout of 2003. Sarafa said that some insurers of Southeast Michigan retail food establishments are stalling on payment of claims.

“Apparently they are saying that the blackout was equipment failure and not a disaster and therefore they may not be obligated for damages,” Sarafa added, referring to the blackout that occurred on Aug. 14 and affected cities from the Eastern Seaboard to the Midwest.

Sarafa will testify at a Michigan Senate Technology and Energy Committee hearing regarding this matter on Wednesday, Sept. 17.

Vic Ventimiglia, owner of Vic’s Market on Southfield Road in Beverly Hills, reportedly said that his insurance company – Ohio Causality – has put a hold on his claim until the cause for the blackout is determined.

“They’re telling me that if someone threw a switch, then it’s not covered,” said Ventimiglia. “If it was a lightning bolt or some natural cause, then they’ll honor the claim.” Ventimiglia reportedly submitted a claim for $67,000 in lost perishable merchandise. “I have receipts for everything we’re claiming and the Department of Agriculture as a witness to our losses,” he added.

George Krcek, comptroller for PizzaPapalis restaurants, which operate 10 company-owned stores in Southeast Michigan, reported that his insurance companies have taken a wait-and-see approach. “Due to the fact that we have multiple policies with multiple carriers, I’ve been involved with five different claims adjusters and four companies,” said Krcek, adding that some insurance companies have initially indicated that they may cover some food spoilage, but they cannot yet determine whether they will cover business interruption losses. “Depending on what they classify as the source of the power outage, will determine the extent of business interruption coverage. Everyone is dancing around the issue, because they don’t want to admit liability. Everything is in limbo,” Krcek added.

“Waiting to determine the cause of the outage is creating hardship for the retail food industry. Obviously the blackout was not the fault of the stores that are awaiting responses from their insurance carriers,” Sarafa stated. He continued by warning that, “If the insurance companies do not step up to their responsibility, we will begin to see more small businesses go without any coverage at all, calling into question the integrity of the entire system.”

The Associated Food Dealers of Michigan represents nearly 3,000 retailers, wholesalers, distributors and manufacturers throughout the state.