The COVID-19 global pandemic is imposing significant economic consequences on millions of businesses. As coverage under business interruption insurance provisions is being contested, due to the alleged lack of physical damage to property or policy exclusions for viruses or communicable disease, governmental agencies and legislators are considering alternative ways to support impacted businesses.
In fact, during the April 10, 2020, White House Coronavirus Task Force Daily Briefing, President Trump expressed concern about coverage of business interruption claims, saying:
You have people that have never asked for business interruption insurance, and they’ve been paying a lot of money for a lot of years for the privilege of having it, and then when they finally need it the insurance company says ‘we’re not going to give it’. We can’t let that happen.
U.S. Rep. Pramila Jayapal (D., Wash.) wrote to chief executives of insurers asking them to justify their refusal to pay claims for business interruption and related coverages. Rep. Jayapal advised the insurers that by denying and not paying these business interruption claims, many businesses will have no choice but to lay off employees, default or miss rent payments, or shut down completely. She urged the insurers to establish procedures to quickly address coverage disputes with policyholders in lieu of expensive claims litigation.
On April 14, 2020, Representative Mike Thompson (CA-05) introduced H.R. 6494, the Business Interruption Insurance Coverage Act of 2020. The Act would require insurance policies providing business interruption to cover losses resulting from (1) any viral pandemic; (2) any forced closure of business or evacuation mandated by state or federal governmental order; and (3) any power shut off conducted for public safety purposes. The legislative text indicates that the Act would void existing and state approved insurance policy exclusions that exclude these losses. It would allow reinstatement of voided exclusions regarding pandemics only if (1) the insured agrees to the reinstatement in writing; or (2) the insured fails to pay any increased premium for business interruption coverage proper notice from the insurer.
In support of the bill, Thompson made the following statement:
Businesses who have purchased business interruption insurance in good faith and are forced to close their doors because of a major event and through no fault of their own deserve to have their claims honored. I have heard from many local businesses in my district who are getting denied and are worried about making necessary expenses, like payroll or rent, during the Coronavirus pandemic. That’s why I introduced the Business Interruption Insurance Coverage Act, a solution to future forced closures to help small business owners and their employees. Forced closures shouldn’t mean the end of the local businesses that power our economy.
While the Act was just introduced and will likely face challenges from the insurance industry, policyholders should make sure to carefully document their losses due COVID-19 and comply with all policy provisions to preserve their rights and options. If the Act passes, be sure to look for notices of increased premiums, particularly if the policy has a virus or communicable disease exclusion that may otherwise prevent coverage.
We continue to monitor these developing efforts. As always, should you have any questions, need any additional information, or wish to discuss these issues in further detail, please do not hesitate to contact our office.