If one of my friend's dads died a couple days before I was having dinner with him, I think it would be.....difficult for me to still go to the dinner with our other friends.
If the dinner was non-refundable, I'd suggest the rest of my group split the cost and supported our friend. Or given the tickets away to anyone I could. I'd be obviously frustrated if the restaurant wouldn't refund the money, and maybe in the heat of the moment go to a paper too, who can possibly say?!
I've also been in the reverse situation (ish), being a service provider and chasing an overdue invoice only to be told the partner had passed away. I wrote it off and passed on my condolences.
I also own a pub, and *some* people are inconsiderate and will book a large group then not show up (even if paying a deposit), so given the chance to respond to a genuine cancellation and an awful situation - I would take it and pass on my condolences.
Many businesses are inefficient in terms of their spend in so many ways (aside from filling all covers / using all space fully), so I think it's churlish and mean-spirited to lack empathy in this situation. Unless they've never, ever wasted a few hundred quid on their legal fees or insurance, or paid a bit too much tax, or overspent on their kitchen equipment, etc......
I also find that businesses which rely on T&Cs are either too large to need to care, or too short-sighted to realise that to survive as a small business you have to treat every customer as an investment and an asset, and above that a human. It is maybe a bit idealist to say that, but it worked for the last business I built.