California Congressman Mike Thompson has filed a bill to help some business owners with business income policies collect benefits for Covid-19-related losses from their insurers.1 Here is a quote from Representative Thompson’s press release explaining his reasons for filing this federal legislation:
So many businesses in our district and across our nation have been forced to temporarily close their doors to help keep employees and customers safe during the Coronavirus-related shutdowns. And when those businesses have filed claims under previously-purchased business interruption insurance, they are often having difficulty getting those claims honored. This leads to confusion and a tough economic hit for businesses that are already struggling,” said Thompson. “That’s why I introduced the Business Interruption Relief Act, a bill to help businesses get their claims honored, cut through the red tape of litigation, and support our economic recovery. We have to help the businesses who are working hard to follow local guidance and keep their doors open in the long term.
According to Houghtaling, the idea behind the BIRP is to eliminate battles over ambiguous coverage language that only serves to enrich plaintiffs lawyers and defense lawyers. ‘We may be against the defense lawyers that will make lots and lots of money off of [coverage litigation] but I really find it interesting that there’s any [other] opposition at all to this,’ he said.
He said he believed that other opposition was ‘a function of confusion’ over what his group was seeking with the proposal.
Insurers that have clear language in their policies wouldn’t be included in the proposed federal reimbursement program. ‘If you use the word pandemic and you excluded it, it’s obvious. You’re out,’ he said, noting that such insurers don’t need any assistance for coverage denials in these cases. Also, ‘if you don’t have any exclusion for viruses or pandemics or anything, you’re not part of the program either.’
‘It’s the ones in the middle, where it may be ambiguous and there’s going to be litigation,’ that the proposal attempts to address.
‘What the insurance industry should do is to pay the policies that they owe; they should deny the policies they don’t owe.’ In between those extremes, ‘if there are ones that they fight about, that we can have arguments on both sides [about], what we’re suggesting is let’s solve this issue now,’ he said. The alternative is spending years in court and billions of dollars on legal fees, he said, suggesting that only insurance industry defense counsel— ‘sitting on the biggest payday they’ve ever had in civil history’—stands to benefit from that alternative.
Not surprisingly, the property and casualty industry is against this bill. So, is the National Association of Professional Insurance Agents who had this to say about the legislation:
PIA National opposed similar legislation introduced in the spring, and it opposes this legislation for many of the same reasons. ‘The bill purports to quickly assist businesses in need, when it is not designed to help all or even most small businesses. Only about 30 percent of small businesses even has business interruption coverage,’ said PIA National Vice President of Government Relations Jon Gentile. ‘As such, only a small percentage of businesses would benefit in any way from this bill, and thousands of business owners would be left struggling.’
PIA National is also concerned with the ramifications of retroactively mandating BI coverage via statute, even when done voluntarily. Such legislation would call into question the reliability of commercial contractual relationships and threaten the financial stability of the insurance sector. And the downstream effects of such a law, which could set a precedent for legislative rewriting of all kinds of contracts, could be unintentionally catastrophic across multiple economic sectors.
PIA National will urge policymakers to reject any proposal—voluntary or not—that would retroactively rewrite BI provisions and instead focus on assistance that will offer sustainable solutions to the vast majority of affected small businesses.
I have mentioned the possibility of federal legislation as a means of relief for these landmark insurance disputes and litigation. I have discussed this with a number of colleagues on various sides of the insurance field. The bottom line is that nothing seems to be commanding bi-partisan movement of federal legislation in the short term. Indeed, state legislation has shown little legs for movement.
It is commendable for John Houghtaling to look for win-win legislation to help resolve disputes for policyholders stuck with their businesses shut down. In my opinion, the only current alternative moving this matter along is through litigation for those policyholders with favorable policy language. Some may suggest that business policyholders wanting to press the matter should think of this as time to “attorney up.”
Thought For The Day
A statesman who confines himself to popular legislation – or, for the matter of that, a playwright who confines himself to popular plays – is like a blind man’s dog who goes wherever the blind man pulls him, on the ground that both of them want to go to the same place.
—George Bernard Shaw
1 H.R. 7412, 116th Congress (2019-2020). (As of 7/13/2020 the text of the Bill had not been sent to the Library of Congress).