Last Updated 04/14/20
In light of the COVID-19 pandemic, several states are taking legislative measures to force the insurance industry to pay for business interruption claims. Business interruption coverage is typically only triggered by a loss resulting from physical damage to property (fire, earthquake) and in most cases any losses caused by virus/bacteria/communicable disease are specifically excluded.
The seven state bills that have been proposed so far would require many commercial property insurance companies to provide retroactive coverage to insureds for losses resulting from the COVID-19 pandemic regardless of the explicit policy language and exclusions.
During Trump’s Friday COVID-19 briefing, POTUS weighed in on this topic by suggesting insurance companies should pay business interruption claims unless “pandemic” is listed as an exclusion.
Opponents of state-level legislation argue that the insurance companies did not charge premiums associate with pandemic risks and therefore do not have the capital required to cover losses due to the coronavirus closures.
In general, the insurance industry’s stance is that a comprehensive federal solution is required as the COVID-19 pandemic is a nationwide crisis. Furthermore, due to the complexity of adjudicating business interruption claims, insurance industry experts assert that the federal solution should leverage existing insurance infrastructure so as to fairly and promptly administer claims.
First Insurance Group is committed to providing updates and insight on this emerging and evolving issue as new information is released.
Suggested additional reading:
IA Magazine Article: Business Interruption Insurance Takes Center Stage at White House
Letter from Senators Addresses the Folly of Retroactive Business Interruption Coverage
Ohio Insurance Agents Position Paper
COVID Business Interruption Policies & Claim Submission