Following President Trump’s remarks two weeks ago, there is growing congressional focus on business interruption insurance and whether it covers claims from COVID-19.
Following President Trump’s remarks two weeks ago, there is growing congressional focus on business interruption insurance and whether it covers claims from COVID-19. This week, several letters on business interruption and its potential impacts were sent to the administration and Congress detailing the counterproductive and dangerous nature of pursuing retroactive business interruption insurance.
Last week, 22 U.S. House Committee on Financial Services Republicans, led by Rep. Steve Stivers (R-Ohio), sent President Trump a letter opposing retroactive business interruption insurance coverage, detailing the harm such proposals would create for both consumers and the insurance market.
Of note, the letter states that “should lawmakers retroactively void exclusions, this would force insurers to pay claims they never priced or collected premiums for and would cost between $255-$431 billion in claims per month, according to one industry estimate. These payments would require using the reserves of other policyholders for protection against risks such as fire, wind, hail, tornados and hurricanes. Additionally, because these reserves will drain rapidly due to the size and scope of losses, this would put insurers’ solvency at risk and destabilize financial markets.”
In addition to the Rep. Stivers’ letter, Rep. Ted Budd (R-North Carolina) and 12 other members of the Republican House Freedom Caucus sent a letter to the White House opposing retroactive business interruption coverage, detailing the many constitutional issues with retroactively changing legal contracts. The letter notes that “efforts by Congress or state legislatures to retroactively amend BI policies will engender unprecedented levels of legal challenges while driving up the cost of insurance coverage of all kinds.”
Finally, a third letter was sent last week to Speaker Nancy Pelosi (D-California) and Senate Majority Leader Mitch McConnell (R-Kentucky) from numerous conservative groups including Americans for Tax Reform, the Center for Freedom and Prosperity, and Americans for Prosperity. The letter warns them of impending lawsuits coming from the trial lawyers and how such lawsuits would only hurt vital industries that support our economy at this time. Regarding business interruption, any retroactive business interruption proposals would be litigated in court for many years to come and would only end up hurting consumers. This letter was also noted in a Wall Street Journal article that ran over the weekend.
The Big “I” will continue to work with the insurance industry, policyholders, the Trump administration and Congress on the Payment Protection Program, the Recovery Fund, and other practical solutions that will help businesses of all types survive the current crisis.
Joseph Cortina is Big “I” director, federal government affairs.