By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She is currently writing a book about textile artisans.
I was saddened to see that New York’s venerable discount retailer of high-end designer schmattas and other goods is shuttering is doors, earlier this month filing for bankruptcy.
According to CNN Business, Century 21 files for bankruptcy and will close all of its stores:
Century 21 has 13 stores mostly in New York City and the surrounding metropolitan area. As of Thursday, it had 1,400 employees. The company blamed the lack of payment on its business interruption insurance as the cause of its demise.
Department store chains large and small were struggling even before the Covid-19 pandemic caused stores to shut temporarily and shift more purchases online. Stores that depended on clothing sales, such as Century 21, have been hit particularly hard as millions of people are out of work and millions more are working from home and not needing to buy as many dress clothes.
Larger, national department store chains, such as JCPenney, Neiman Marcus and Lord & Taylor have filed for bankruptcy during the pandemic, with Lord & Taylor announcing its own plans to shutdown.
Now first when I saw the story, I thought this might be yet another case where private equity had run amok and claimed another victim, as in the cases, of Toy R Us and Fairway.
There’s been an ongoing retail apocalypse for the last years, and COVID-19 has only worsened the situation.
Who Is It This Time?
This is not the first case where a customer has paid its insurers years of premiums, only to be told when they need to make a claim that the loss isn’t covered. We were one of many in the neighborhood to have our house burgled and worried that our insurance might be cut off because we had made a claim (it wasn’t):
But Century 21 said the final straw was the fact that it did not get $175 million it had filed for under its business interruption insurance for the revenue it lost when pandemic forced store closures. It said similar insurance payments saved it 19 years ago in the wake of the September 11 terrorist attacks — it had a store directly across the street from the World Trade Center, which was destroyed. But the company said it has not been able to get 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 significant premiums every year for protection against unforeseen circumstances like we are experiencing today, have turned their backs on us at this most critical time,” said Century 21 co-CEO Raymond Gindi.
Century’s view is that if they had received some insurance payouts, they could have survived.CNN again:
While retailers across the board have suffered greatly due to Covid-19 … we are confident that had we received any meaningful portion of the insurance proceeds, we would have been able to save thousands of jobs and weather the storm.”
Unsurprisingly, insurers don’t seeit that way:
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 the losses from pandemic-forced shutdowns earlier this year.
There typically must be direct physical damage to a company’s place of business for these policies, also known as “business income policies,” to pay a claim for lost revenue, he said.
“There are a number of businesses nationwide who are suing their insurers, believing the a business interruption policy pays out when there is no direct physical damage,” he said, adding that courts have been upholding insurer’s arguments. “In order to have the resources to pay their legitimate claims, insurers must deny ones in which they are not an obligation to pay.”
Those legitimate claims include businesses shuttered because of damage caused by protests or riots in some US cities, or by wildfires or wind damage from storms like Hurricane Laura.
Barry estimates that only 35% to 40% of policies written to medium sized businesses and larger have business interruption insurance. But he said almost all have the same exclusions.
Century was one of those places that make New York New York. On the clothing side, there’s nothing left like it.There was Loemann’s – now also closed. But the finds, when they came, were never nearly as good.
One weakness of mine is shoes. But I have particular requirements. I don’t wear heels. Gave them up when I was at MIT. And as a consequence, I still have very good feet. No aches and pains. Yet the shoes have to be interesting: either in color, design, or texture. Over the years, I’ve scored somereal finds from Century, some of which I still have, as I take very good care of my shoes. But I didn’t just buy shoes and high-end designer duds there.
It was my go-to place for more mundane items: they had a surprisingly good luggage department. And it was better quality stuff than you can pick up at your suburban Marshalls, most of which I find don’t last more than 3 or 4 long-haul flights. Especially the modular plastic type – which I’ve had to eschew, else when they inevitably split, I know I am contributing unnecessarily to the world plastic problem.
And towels. Let me tell you about the towels.
A shopping trip that never happened is the closest I came personally to 9/11. For those of you who know Manhattan you’re perhaps not aware that Century was very close to the World Trade Center. Across the avenue as a matter of fact.
We were hosting a young couple, the man was the brother of someone I knew quite well from my ski bum days. And I skied often with their father, who asked me if I would mind putting up his son and partner for a brief stint after their finance internship was over.For which they were not very well paid, but being young, and in love, and never having been to NYC, enjoyed themselves anyway.
And they were lovely thoughtful people. Cash poor but time rich, they queued up one night and slept in the park to score two pair of Public Theater Tickets to see the Seagull — with Meryl Strep IIRC.
Anyway, the day of their arrival, we decided we’d take in a quintessential NY experience: a game at Yankee Stadium sitting in the bleachers. This was the old Stadium – before rampant commercialism ruined the place, in the form of corporate boxes, of too many different classes, with the emphasis beihg on the entertainment experience rather than sitting in that glorious space, communing with the mass of other spectators, and watching the goddam game. (And I suppose, that I should acknowledge that the place I saw the Yanks win all those championships wasn’t even the original stadium. The first I went to, as a matter of fact, had that massive center field, and the Monuments were still in play.
But this post is about Century 21, not Yankee Stadium. Anyway, it had been very hot and humid in NY. And it so happened that the heavens finally exploded the night we chose to attend and the game was rained out. So what to do?
We schlepped back to Brooklyn to enjoy a couple of drinks at a local watering hole, and then onward back to our house.
I said good night to the youngsters but then resolved to do something about those towels. I’d given each of them a set, but they were booked in for at least a week, and the linen cupboard was bare and we didn’t really have any additional decent spares. This called for a trip to Century 21.
But because of our escapades the night before, we’d lingered in the Bronx until the game was called, and then back to Brooklyn, and then the drinks, and then home, it had gone at least two before we hit the pillows.
So I had just roused myself and was enjoying my first coffee in our garden when my mother called to convey a message from my brother-in-law the cop: “Tell Jerri to get the hell out of NY.”
My guests stayed until US airspace was opened again.
Never did get those towels.
Not that I think they minded.
It wasn’t one of my go tos, but I did appreciate Century 21. As I said earlier, I never really felt comfortable in their Lincoln Square store, perhaps it was rebellion about it taking over a Barnes and Noble. But I found more than a few gifts there.
I would never do well at insurance. If the company can tell me what the store could have done to avoid this closure, perhaps I could understand their not paying. But this just feels like they lost too much money and count on companies going under before they can get legal relief.
It is an unnecessary loss.
In olden times (1997-99) when I was working at the World Trade Center – Century 21 was across the street – my go to for just about everything – still have a few of its goods strewn around…
The continent sized beast of Amazonia becomes ever more engorged.
UK insurers have just lost a test case here weasling out of business interruption claims. A handful of policies had exclusions upheld but most found for the policyholders. The case was under an industry agreed process with the regulator and the judgment can be appealed but payouts have to be immediate. Not sure what happens if it is overturned but right now, chalk one up for justice!
Apparently Penny’s got bought out in part by its mall owner creditors and will survive–for awhile at least. My mother worked there briefly when I was a kid and once sent me several doors down the street to our downtown movie theater so it could act as baby sitter. Watched Parent Trap twice in a row and joined the ranks of Haley Mills crush-ees.
I’m told that Macy’s is merchandise deprived but Dillard’s (may not exist up north) is doing ok.
I was in NYC from 83 to 92. Century 21was my go to spot for clothing and housewares, for this was before I knew of or could get to a giant outlet mall like Woodbury Common. It’s too bad for New Yorkers.
One wonders how much premium money Century 21 paid to this insurer over the lifetime of Century 21’s involvement with this insurer. One wonders whether that entire amount of premium money would in itself have been enough for Century 21 to survive a while with. If it would have been, one wonders why any surviving company would fail to learn the lesson of not bothering to buy such insurance . . . but rather, simply save all that money as a form of “self-insurance” instead.
(One also wonders if the insurance company in question owns shares in Amazon. One wonders what other physical retailers insure themselves with that company. One wonders whether that company with-holds payment in order to exterminate its victim companies in order to make its Amazon shares go up).
The WTC Century21 was part of my daily commute many times during my deep Brooklyn years. I’d grab one of the Express buses from Brooklyn instead of suffering on the local only L. Cost more but it was a comfy, less hectic commute. I would get off at Church St. & Liberty St, then grab the E a couple blocks north past Century21 up to 14th. Always bustling in the mornings with an interesting mix of FiDi workers, commuters in transit and tourists. I guess Pandemic Policies are going to become a thing in the COVID-19 aftermath … one wonders, as dw said above.