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Tuesday, 23 June 2020 18:12

Pandemic B.I. Claims: After the Sound and Fury, Where Are We Now?

Written by Max H. Stern and Jessica E. La Londe, PropertyCasualty360
What will be the long-term impact of lawsuits and legislation on business interruption insurance?  What will be the long-term impact of lawsuits and legislation on business interruption insurance?  Shutterstock

Index

It did not take long.

Within days of the first stay-at-home orders, news began bubbling about how insurance companies were going to handle the crush of business interruption (BI) claims for the economic losses caused by the shutdown.

 

There was no shortage of blogs, articles and discussions about whether there was coverage for these claims, and in the mere three months since, this issue already has a long history. But where do things stand now?

 

Given all that has happened, we cannot cover everything here, but will instead highlight some events along the way and provide some thoughts on the current trend.

 

The first BI coverage lawsuit was filed in Louisiana on March 16 by a New Orleans restaurant. As we all know, other lawsuits followed. At the same time, and for weeks thereafter, it appeared there was going to be unprecedented pressure on insurers to provide coverage and efforts began to shortcut actual policy wordings.

 

For instance, starting on March 16, with New Jersey, the legislatures of several states sought to legislate coverage. To date, at least eight states have proposed bills that would effectively mandate BI coverage in certain circumstances: Louisiana, Massachusetts, Michigan, New Jersey, New York, Ohio, Pennsylvania and South Carolina.

 

However, so far, none of these proposed bills has been passed, all have received some sort of backlash---including arguments that they are unconstitutional---and some, like New Jersey’s, have been shelved.

 

On March 18---before statewide stay-at-home orders had even been issued---members of the U.S. House of Representatives wrote to certain insurance industry trade groups, including APCIA, NAMIC, IIABA and CIAB, encouraging them to accept coverage for COVID-19 losses:

 

“We urge you to work with your member companies and brokers to recognize financial loss due to COVID-19 as part of policyholders’ business interruption coverage.”

 

Over the ensuing weeks, there were many other similar letters sent to insurance companies, trade groups and state insurance commissioners.

 

The legislation was also introduced in the U.S. House, including HR 6494, “Business Interruption Insurance Coverage Act of 2020,” introduced on April 14, which would effectively mandate BI coverage in certain circumstances.

 

There are also some efforts at both the state and federal level that seek to establish programs or assistance for future pandemics of this nature.

 

Even President Donald Trump waded into these murky waters, making insurance coverage an above-the-fold issue. During an early April briefing, he said, “I would like to see the insurance companies pay if they need to pay; if it’s fair. And they know what’s fair and I know what’s fair…”.

 

Trump noted there are businesses who have paid for BI insurance, “and then when they finally need it, the insurance company says, ‘We’re not going to give it.’ We can’t let that happen.”


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