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Pressure on Business Interruption Insurance Increases After President Trump’s Comments

This week, two separate business interruption bills were introduced in the U.S. House of Representatives.
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Following President Trump’s remarks on Friday, there is growing congressional focus on business interruption insurance and whether it covers claims from COVID-19. This week, two separate business interruption bills were introduced in the U.S. House of Representatives amongst other developments.

On Monday, Rep. Pramila Jayapal (D-Washington) sent a letter to nine company CEOs expressing concern over insurance companies denying claims for COVID-19 and requesting answers to a series of questions on the subject. The letter states that insurers are not interpreting their commercial liability policies to cover losses related to COVID-19 and implies that business owners are improperly being denied coverage. However, the letter fails to point out that only around 40% of businesses have commercial policies that include business interruption and almost all of those policies included specific exclusions for pandemics.

On Tuesday, Rep. Mike Thompson (D-California) introduced legislation cosponsored by nine other members that would require every property-casualty policy that includes business interruption coverage to cover losses stemming from a viral pandemic or business closure from the date of enactment of the bill. The legislation would also preempt state law and nullify any such prior exclusions in force on the date the bill is enacted. In response to the legislation, the Big “I,” along with the American Property-Casualty Insurance Association, the Council of Insurance Agents and Brokers, the National Association of Mutual Insurance Companies, and the Reinsurance Association of America sent a letter detailing our opposition to the legislation.

Also on Tuesday, Rep. Brian Fitzpatrick (R-Pennsylvania) introduced legislation cosponsored by three other members that would require commercial property-casualty policies to include business interruption coverage for “national emergencies,” which would include losses associated with a virus or pandemic. In contrast to Rep. Thompson's legislation, the effective date of the insurer business interruption coverage requirement would be conditional upon the creation of an amorphous, unknown and yet-to-determined federal backstop for excessive insurer losses. Last week, the Big “I” again joined forces with its trade association partners to send a letter opposing the legislation.

The Big “I” created a document that explains what business interruption coverage does and does not cover and why attempting to revise insurance contracts is a bad idea. The document notes that legislatively rewriting existing insurance contracts by somehow nullifying the virus exclusion or the physical damage requirement would be unconstitutional.

The Big “I” is also working closely with the business community on a proposal that would enable those in need to receive compensation from the federal government. The proposal, titled the COVID-19 Business and Community Continuity and Recovery Fund (the "Recovery Fund"), is modeled after a streamlined version of the 9/11 Victims Compensation Fund legislation, with important distinctions designed to simplify the application process and speed payment to COVID-19-impaired business, while reducing the potential for fraud.

The Big “I” will continue to work with the insurance industry, policyholders, the Trump administration and Congress on the PPP, 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.