How Various Businesses Will Fare in the Coronavirus Economy

The following article by John Dunlap, Esq. will be published in the Memphis Lawyer Magazine, a publication of the Memphis Bar Association.

The Coronavirus and the resulting economic decline leaves many questions for many different businesses in the national and state economies.

While the United States has experienced numerous recessions and depressions throughout its history, it has never dealt with an economic downturn caused by a disease. In Medieval Europe empires were greatly weakened by numerous plagues that ravaged the continent. The plague of the Sixth Century reduced the population and birth rate of the Byzantine Empire to the extent that tax revenues declined, making it impossible to effectively combat invasions from Muslim aggressors.

The only event that is remotely similar to the Coronavirus is the Spanish Flu epidemic and the depression of 1920-1921. Most historians and economists forget that the depression of 1920-1921 was more severe than the Great Depression of the 1930s, even though it only lasted about sixteen months before the economy recovered. Most economists believe that the Spanish Flu had little, if anything, to do with the economic downturn of the early 1920s.

Our office has been assisting businesses under financial distress restructure their debt and reenter the economy since 1989. While we have numerous successful reorganizations, not all Chapter 11 cases reach the confirmation stage. This article will examine various businesses and the advantages and disadvantages they face in today’s economic climate. While by no means exhaustive, this list attempts to discuss at least some of businesses affected by today’s economy.

Restaurants: Restaurants have low profit margins and high operating expenses. Many have difficulty surviving in a favorable economic environment. To further complicate matters, restaurants were of the first industries to be ordered closed by local, state, and federal guidelines. The States of Tennessee, Arkansas and Mississippi have relaxed the open container laws to permit restaurants to sell beer, wine and mixed drinks with carryout meals in an effort to ease the loss of income from closures. Virtually all restaurants have implemented curbside service to offset the loss of patrons. In all likelihood, this will not generate enough income to meet their monthly operating expenses. The larger chain restaurants should survive, but many of the privately owned restaurants will not be able to reopen.

Hair Salons: Hair salons normally need a great deal of space and prefer visibility from the road. These factors result in forbiddingly expensive rent. On the other hand, hair salons have modest payrolls due to the fact that the overwhelming majority of stylists either rent space or work on commissions. This business also enjoys an intensely loyal client base. Finally, the space hair salons rent cannot easily or inexpensively converted into other types of business tenants. Since there is a limited number of salons, landlords will have difficulty replacing them and their income. If the salon appears to be a viable business, it could be in the property owner’s best interest to either waive delinquent rent or move it to the end of the lease. 

Hair salons are volume businesses that require a constant cash flow, but the fact that they provide a necessary service and benefit from a loyal client base will enable the majority of them to survive.

Healthcare Workers: At first glance, it would seem obvious that medical clinics will have an enormous influx of patients and an increase in income. However, this is not the case when more closely examined. While hospitals will be overwhelmed, many other healthcare providers are experiencing a decline in patients or are closed altogether. The majority of surgical procedures performed in the United States are elective procedures. It has been necessary to reschedule virtually all elective procedures. Our office has numerous clients scheduled for intestinal bypass surgery that have been cancelled indefinitely. Some hospitals and same day surgery centers have laid off surgical assistants and other employees associated with elective procedures.

Once the Coronavirus crisis subsides, healthcare facilities and their employees should recover rapidly.

Commercial Property Owners: Companies that own and rent commercial property will undoubtedly experience an extreme decline if income. Many businesses that have been forced to close will have no income for at least two months and when, and if, they reopen it will take several months to recover. During this period of time the tenants may not be able to pay their rental obligations. The States of Tennessee and Arkansas have prohibited all property owners from filing eviction actions in court or evicting tenants for the months of April and May. Even if the property owners evict tenants who are not paying, replacing there tenants will be arduous at best.

Large shopping malls were already under financial distress due to an increase in online shopping. Most large malls are heavily leveraged and have negative equity in their property. Many of the smaller commercial property owners in Tennessee do not have mortgages on the property, these owners should survive the crisis while those whose property is encumbered by liens may be facing foreclosures and bankruptcies.

Residential Property Owners: Owning and managing residential rental property even in a favorable economy and in affluent neighborhoods is challenging. During an economic downturn the residential rental businesses becomes an unachievable undertaking.

The majority of financial planners recommend paying no more than forty percent of the value of the property in order for it to be a viable investment. I routinely have clients who watch cable TV infomercials and are convinced rental property is the key to financial freedom. I advise clients that unless they can pay six months of mortgage, maintenance, property taxes and insurance without it placing their credit report in jeopardy, they should not invest in residential rental property.

Many tenants have lost their jobs and are unable to pay rent, all courts are closed and property owners are prohibited from evicting tenants. However, the property owner’s mortgages, insurance and property taxes will still be owed. If the economic decline continues, the value of much of this property will decline, resulting in erosion of equity or negative equity.

In the event foreclosures reach record levels as they did in the first decade of the twenty-first century, lenders may have more foreclosed property than they can manage. This could enable property owners to negotiate lower values, lower interest rates and reduced monthly payments through Chapter 11 Reorganizations.

Automobile Mechanics: As vehicles have become more sophisticated, it has been necessary for mechanics to spend more money on diagnostic equipment as well as additional training and training manuals. This increases their operating expenses. However, auto-mechanics seldom have accounts receivable or large amounts of inventory that must be serviced by debt.

There is no question that automobile mechanics, oil changing locations, and tire services will experience a decline in revenue but positive factors such as providing an essential service, manageable payrolls and low inventory costs will ensure that virtually all of them will survive.

Residential Contractors: Residential contractors perform an enormous number of services that will remain open during the coronavirus quarantine. Contractors have high operating margins and have the ability to reduce their workforce promptly. While their insurance obligations are expensive, they have a low debt to asset ratio and a low default rate for accounts receivable. Resident contractors are in a unique position in that the majority of their contracts are generated by personal referrals, resulting in a small percentage of their budget being devoted to advertising.

Contractors may have an advantage because many homeowners will be unable to purchase new homes and will decide to renovate their existing homes. Instead, contractors may experience an increase in income in the months following the coronavirus quarantine.

Gyms and Fitness Centers: Gyms and fitness centers did everything possible to remain open during the coronavirus crisis. Several fitness centers employed additional personnel to wipe down the exercise machines after each use and to clean the entire center with disinfectant each evening. One Center even required their members to wear masks while on the premises. None of these steps prevented all of these facilities from being closed by government orders.

A considerable number of privately owned health clubs and gyms had already been forced to shut down due to their inability to compete with national chains that offer extended hours and lower membership fees. Many of the more vulnerable of these businesses closed before the outbreak of the coronavirus.

These businesses have costly rental obligations and moderate insurance obligations. Because most of the personal trainers and health and wellness therapists are independent contractors who are compensated directly by the members, fitness center payrolls are manageable.

Since the majority of the gyms and fitness centers are national chains, most will survive. Many continue to charge the monthly membership to their members’ credit cards even though they are closed.

Daycare Centers: In Tennessee, Arkansas and Mississippi daycare centers have been allowed to remain open on a limited basis. However, the daycare centers affiliated with private schools remain closed. The majority of daycare centers not affiliated with private schools receive large subsidies from the State of Tennessee. Most daycare centers are still receiving this grant despite the fact that their enrollments have decreased noticeably, how long this will continue is unknown.

While cashflow for most daycare centers is adequate, many are not well managed businesses. Our office has frequently assisted daycare centers negotiate tax liens and civil judgements due to their failure to file tax returns, pay tax returns and to pay suppliers. Some daycare centers that were having difficulties prior to the coronavirus crisis, may not be able to survive in the current environment. However, daycare centers provide a vital service and will continue receiving government subsidies. The daycares affiliated with private schools should have little difficulty remaining open.

Churches: Jesus and the early founders of Christianity never intended for Houses of Prayer to be a business. Yet as their members expanded, church buildings became permanent structures and priests and support staff required financial compensation, churches became businesses.

All churches must fund their buildings through traditional secured mortgages or bond issues. Companies exists that do nothing but provide mortgages for church buildings and issue bonds on behalf of churches. Payroll expenses have also increased drastically. The days of ministers taking the “Oath of Poverty” are gone. For example, a minister in one of the larger churches in Memphis earns over $800,000.00 per year and is provided a private jet.

Church attendance and financial support has fluctuated a great deal since the end of World War II in the United States. Church attendance and membership was extremely high in the closing years of the 1940’s through the middle 1960’s. Church membership began a steady decline in the 1960’s and 1970’s. Church attendance increased during the 1980’s and 1990’s but it was not universal. Large nondenominational churches and evangelical churches thrived while the liberal and moderate denominations such as Episcopal, Lutheran, Methodist and Presbyterian continued to experience declines. Since the beginning of the 21st century church membership has continually declined. The only exception are the Mega Churches in urban areas.

Churches have experienced financial distress already due to zero attendance and no financial support. Our office is representing a church that reported $12,000.00 in offerings in February, but only $128.00 in March. This church’s experience is probably a good indication of what all churches are experiencing.Many of the smaller churches may very well lose their buildings and it will be difficult to continue without a meeting place.

Local Delivery Services: This category includes Uber, Taxi Services, Courier Services as well as Grub Hub. These businesses have been thriving due to the social distancing requirements. They are delivering food from restaurants, products from grocery stores and even Wal-Mart and Target.

All of these companies require drivers to use their own vehicles and provide liability insurance. In probability, consumers will become accustomed to having groceries and food delivered to their homes and some will continue using the service when the quarantine is lifted. The unknown factor is whether companies will be able to maintain enough dependable drivers once the economy improves and mass drivers will return to their former jobs or receive more attractive employment opportunities.

Florists: Flower shops and florists have been hit hard by the quarantine. In the majority of states, florists are prohibited from selling flowers for all events except funerals. The problem is compounded by the fact that spring is their most profitable season.

Florists have high rental expenses due to the fact their businesses require premium space and a great deal of it. Insurance and payroll expenses are modest, but their inventory is expensive and often leveraged. Most florists should survive, their ratio of stores to customers is low and they could benefit by a resurgence in orders once weddings and other such events are resumed.

Grocery Stores: Independently owned grocery stores are almost non-existent in today’s economy. Large chains have the ability to survive recessions more easily than single stores, owned by individuals. The chain stores remain open and have done an excellent job providing delivery and pickup services, grocery stores should have little difficulty surviving in the current economic climate.

This brief essay in no way is attempting to discuss all businesses struggling with the Coronavirus and mandatory shutdowns. Furthermore, these projections may not prove to be accurate, two of the leading economic periodicals believe that once the virus subsides and businesses reopen the economy will recover in a few months. Others are not as optimistic, as this is uncharted territory. While epidemics such as yellow fever were so severe many cities lost their charters and ceased to exist as municipalities, the United States has never experienced anything like this in the past. Contrary to popular belief, while many businesses suffered reduction in income in past recessions, very few permanently closed. The current economic downturn is different from the past because such a large percentage of businesses were forcefully closed. Another unknown factor is the impact the enormous infusion of cash into the economy by the Federal Government. One thing is certain however, the American entrepreneurial spirit will continue on and new businesses will rise and flourish in the wake of these unprecedented circumstances and the majority of businesses suffering currently will find a way to remain alive.

Dunlap to Teach Voir Dire and Jury Selection Course

Attorney John Dunlap will be teaching two courses on Voir Dire and Jury Selection for the National Business Institute on November 14, 2019. These courses are for attorneys who wish to learn more about the right strategies and steps to take during the jury selection process as well as what questions to ask.

Mr. Dunlap will be teaching two sections titles “Voir Dire and the Art of Asking the Right Questions” and “Jury Selection Strategy.” Both sections will be presented at the course in Memphis.

Mr. Dunlap’s sections cover the following:

    1:00 – 1:45, John E. Dunlap
    1. Who Goes First: Plaintiff or Defense? Strategy of Going First or Second
    2. Establishing Your Credibility and Building Trust
    3. Getting to Know Prospective Jurors
      1. Personality Types to Watch for and Use to Your Advantage
      2. Reading the Non-Verbals
    4. How to Conduct an Effective Group Interview
      1. Standard Questions to Always Ask
      2. Practical Tips for Question Construction
      3. Getting the Jurors Talking
      4. Simple Ways of Keeping Track of Which Juror Said What
      5. Preparing Jurors for Delicate/Unpleasant Aspects of the Case
      6. Getting Truthful Answers to Tough Questions
      7. How to Ask Questions When a Positive Answer May “Poison” the Entire Panel
      8. When to Ask Follow-Up Questions in Chambers
      9. Uncovering Biases that will Sink Your Case
    5. How and When to Object to Opposing Counsel’s Questions
    6. What NOT to Do in Voir Dire
    1:45 – 2:30, John E. Dunlap
    1. Identifying Whom to Strike
    2. Different Methods of Striking Jurors
    3. Peremptory Challenges – When and How to Use These Precious Few
    4. Understanding Opposing Counsel’s Striking Strategy
    5. Alternate Juror Selection

Attorneys who wish to register at the National Business Institute may do so and use the courses for CLE credits.

Dunlap to Teach The Rules of Evidence Course

Attorney John Dunlap will participate in teaching a course on The Rules of Evidence for the National Business Institute on May 7, 2019. The course is intended for attorneys who wish to learn more about the evolving changes in the Rules of Evidence, particularly about jury trials and evidence procedures.

Mr. Dunlap wrote one section of the course, titled “Presenting to the Judge and Jury” and will present that section at the course in Memphis. There is another course in Nashville where Attorney John M. Cannon will be teaching from Mr. Dunlap’s text.

Mr. Dunlap’s section covers the following:

2:50 – 3:30, Written by John E. Dunlap. Presented by John M. Cannon in Nashville and John E. Dunlap in Memphis.

  1. Authenticating Exhibits
    1. Stipulations
    2. Self-Authenticating
    3. Authenticating – Laying the Foundation for Admissibility
  2. Presenting Deposition Records
  3. Introducing Juries to Evidence
  4. Providing Jury Notebooks
  5. Presenting Your ESI: Common Mistakes Made in the Courtroom
  6. Computer-Aided Displays, Video and Graphics

Attorneys who wish to register may do so at the National Business Institute and use the course for CLE credits.

Guidelines for Filing Long-Term Disability Insurance Claims

This article is provided by the Law Offices of John E. Dunlap, P.C.  to assist you in the insurance claims process.  It is not a substitute for legal representation.  Every claim is different, and only by employing a lawyer do you fully protect your rights.  If you have questions about your long-term disability, please call our office at (901) 320‑1603 or email us on our web site.

Locate the original and any addendums of your policy.  Maintaining good records of your contracts is essential, should you need to go to an administrative appeal or litigation.  Do not rely on your employer’s human resources department or insurance carrier to provide those contracts.

Do not try to represent yourself.  Working with an attorney who is experienced in handling these type of claims could mean the difference between a properly prepared claim and one that gets denied.

Monitor dates and deadlines.  If your policy requires a 90‑day filing of proof of loss, make every effort to be several days or even weeks ahead of the curve.  Filing even a day late could turn a claim into a denial.  Moreover, send all correspondence to the insurance company by certified mail and make certain you keep all copies for your own records.

Medical records are probably the most important part of your claim presentation.  You have a right to have a copy of all your tests, records and reports and you need time to review them.  If there are things you don’t understand, ask your treating physician.  If your doctor does not provide a satisfactory answer, obtain another opinion.  If there is information that does not seem correct to you, insist on discussing it and if necessary, request that corrections be made in the proper manner.

Treating doctors are not insurance professionals or lawyers and do not understand many of the elements in determining claim decisions.  Medical records must clearly indicate limitations and restrictions and relate specifically to your occupation and should clearly describe how these problems prevent you from performing tasks necessary to do your job.

Medical records must include documentation that could also serve as evidence of your inability to perform the necessary task associated with employment, whether it’s physical labor or sedentary employment.  Insurance adjusters often fail to consider the cognitive requirements of work, so you must present these aspects of the job.

Every time you have contact with the insurance company, be careful.  Always make detailed notes on who you spoke with, the date, time and details of the conversation.  If necessary, have a friend or professional on the phone or in the room who could serve as a witness on your behalf.  Tell the insurance company representative another person is on the phone line with you and make a note that this has been made clear to all parties.  After each phone conversation, send a letter that describes the conversation and all details.  In the letter by requiring the insurance company to respond if they disagree with the details.

Protect your claim.

No matter how friendly the insurance adjuster may be, they are not your friends.

Filing a disability insurance claim can often result in the possibility of surveillance and review of any material you post on social media.  If your claim involves being unable to travel to get to work, you may be videotaped if the investigator sees you traveling.  If you call the adjuster from a phone not located in your home, caller ID can be established to prove you are able to travel.  Today’s insurance company watches public posts, forums, bulletin boards, chat rooms, social networking sites and any online sources where information can be gathered.  Our office recommends that people refrain from using Facebook or Twitter while the claims process is ongoing.

Filling out insurance forms is much like a lawyer preparing for trial in that every piece of information is a chance to build or destroy your claim.  Always be honest, but do not leave yourself exposed to evidence contrary to what you have stated.  If you have days where you do not feel sick or disabled, be prepared to state how many days a week you’re able to function.  If the disability leaves you unable to do much of anything except between 10:00 a.m. and 11:00 a.m., state this.  If the forms are not long enough, make a note on that form that clearly indicates more information is on the attached page.

If the insurance company instructs you to go for an Independent Medical Examination understand that you are going to be examined by a doctor who is employed and paid for by the insurance company.

If you are ordered to go for a Functional Capacity Evaluation, review your policy to determine if this test is specifically in the language of the policy.  These tests are not necessarily required, and they are often not accurate.  If you do go for the test then you are asked to perform a task you know you cannot do without pain or discomfort, do not do it.  Be certain to document how you feel following the testing, and consider seeing your treating doctor shortly after the test for further evaluation.

The Importance of Owning Disability Insurance

A large number of Americans believe that they will never become disabled despite statistics to the contrary. An article from the Bureau of Labor Statistics reports that in 2014, only 34 percent of private industry workers participated in their employer’s Long Term Disability Insurance program.

Compare that number to the likelihood of becoming disabled during their working lifetime:

A typical male, age 35, 5 foot 10 inches, 170 pounds, non‑smoker, who works an office job, with some outdoor physical responsibilities and who leads a healthy lifestyle has a 21 percent chance of becoming disabled for 3 months or longer during his career; with a 38 percent chance that the disability would last 5 years or longer and with the average disability for someone like him lasting 82 months.

A typical female, age 35, 5 foot 4 inches, 125 pounds, non‑smoker who works an office job, with some outdoor physical responsibilities and who leads a healthy lifestyle has a 24 percent chance of becoming disabled for 3 months or longer during her working career; a 38 percent chance that the disability would last 5 years or longer, and with the average disability for someone like her lasting 82 months. According to these statistics, 67 percent of American employees are at risk if they should become disabled and unable to work. Our office recommends the following:

  • If your employer offers disability insurance, participate in the program. Social Security disability benefits can take years to obtain in many instances.
  • If your employer offers disability insurance and you have a policy, consider buying a private policy. If you have a certain lifestyle that you would want to maintain, chances are very good that the policy from your employer will not be enough for more than subsistence levels.

If your disability insurance has been denied, delayed or terminated please call our office for a free consultation.