Century 21 files for bankruptcy and will close all its stores

Century 21 has 13 stores, primarily in New York and the surrounding metro area. As of Thursday, it had 1,400 employees. The company blamed the default on its business interruption insurance for the cause of his disappearance.

But Century 21 said the final straw was the fact that it didn’t get the $175 million it asked for under its business interruption insurance for income it had. lost when the pandemic forced stores to close. He said similar insurance payments saved him 19 years ago in the wake of the September 11 terrorist attacks – he had a store right across from the World Trade Center, which was destroyed. But the company said it was unable to secure payments this time.

“We now have no viable alternative but to begin the closure of our beloved family business because our insurers, to whom we have paid large premiums each year to protect us against unforeseen circumstances like the ones we are experiencing today turned their backs on us at the most critical moment,” said Raymond Gindi, co-CEO of Century 21.

Many businesses that file for bankruptcy use the process to get rid of debt and other debts and stay in business. JCPenney and Neiman intend to stay in business. Some, including most US airlines and General Motors (GM), emerged from bankruptcy and posted record profits. But retail success stories are tougher. Century 21 said that without the insurance money owed to it, it makes sense to go straight into liquidation.

“While retailers at all levels have suffered greatly due to Covid-19…we are confident that had we received a meaningful portion of the insurance proceeds, we could have saved thousands of jobs and weathered the storm. .”

But Michael Barry, spokesman for the industry trade group Insurance Information Institute, an industry trade group, said most business interruption insurance policies do not cover losses from forced closures. by the pandemic earlier this year.

There generally must be direct physical damage to a company’s place of business for these policies, also called “business income policies”, to pay a claim for lost income, he said.

“There are a number of companies across the country that are suing their insurers, believing that a business interruption policy pays when there is no direct physical damage,” he said. said, adding that the courts had upheld the insurer’s arguments. “In order to have the resources to pay their legitimate claims, insurers must refuse those in which they are not obligated to pay.”

These legitimate claims include businesses closed due to damage caused by demonstrations or riots in some US cities, or by Forest fires or wind damage from storms like Hurricane Laura.

Barry estimates that only 35% to 40% of policies written with medium-sized companies or larger have business interruption insurance. But he said almost all have the same exclusions.

“Selling a policy that covers everything would be so prohibitively expensive that no one would even buy one,” he said.

Comments are closed.