The Small Business Majority, through their Policy Agenda,  support “Pass legislation that would ensure business insurance companies cover COVID-19 revenue losses.”

Note that the business interruption insurance (BII) does not cover COVID-related expenses. The Small Business Majority endorsed two pieces of legislation nationally that would allow insurance companies to cover those expenses that small businesses have incurred as a result of COVID. One is HR 6494, and the other is HR 6497.

These Bills were introduced in March/ April and there is no advance on these Bills. Note that insurance contracts have to meet certain characteristics, such as affordability (the pure risk [return to the previous financial situation before the loss with an economic compensation] has to be covered by the payment of premiums of the insured) and non-catastrophic (insurance agreements exclude war, earthquakes, etc.).

From our involvement in Policy committees, we need to keep in mind that during the COVID19 crisis, the Government through the Small Business Administration issued the PPP program whose objective is to provide funds to cover payroll, rent, mortgage and utilities for small and medium businesses impacted by COVID. Note that the PPP program covered mainly payroll expenses to avoid having the same money outflow in unemployment payments at the State and Federal level. The Government through the Federal Reserve has the ability to print money, buy assets, etc. in the trillions of dollars, but they were not even able to cover all the revenue losses due to COVID19, just covered some of the aforementioned expenses for a brief period of time. The insurance companies are entities that do not cover catastrophic events, the insured did not paid premiums to pay for those events, there are constitutionality issues with a retroactive loss, and the insurance companies would all go bankrupt if they had to cover loss revenue for their clients due to COVID19.

Club Industry article

“Some groups oppose the bill because it nullifies exemptions in existing insurance policies for future pandemics. However, the bill does not appear to ask for retroactive recuperation of losses from the March and April shutdowns.”

“IHRSA has reached out to Thompson’s office for clarity on his bill, according to an IHRSA spokesperson. “There are a lot of questions about the constitutionality of changing current insurance contracts,” she stated. ”

“Not everyone is supportive of the business interruption insurance bills. The bills “would be like a Category 3 hurricane in every major city occurring at the same time, or a wildfire burning all across America, and we had to cover that,” Sean Kevelighan, CEO and president of the Insurance Information Institute, told the Washington Examiner. “You just can’t underwrite risk like that; it’s not affordable.”

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The National Association of Insurance Commissioners (“NAIC”) also made its opposition known to any such federal measures in a March 25, 2020 public statement. NAIC expressed concern over insurance companies being required to cover such claims, which in their view would “create substantial solvency risks for the sector, significantly undermine the ability of insurers to pay other types of claims, and potentially exacerbate the negative financial and economic impacts the country is currently experiencing.” In fact, the Congressional Research Service (“CRS”) has noted in its published March 31, 2020 Business Interruption Insurance and COVID-19 Report that David Sampson, CEO of the American Property Casualty Insurance Association (“APCIA”), estimated the cost of covering business interruption claims for small businesses to be anywhere from $110 billion to $290 billion monthly. Similarly, APCIA has released two statements (March 26, 2020 and April 6, 2020) expressing concern over such policies, “Pandemic outbreaks are uninsured because they are uninsurable. Any action to fundamentally alter business interruption provisions specifically, or property insurance generally, to retroactively mandate insurance coverage for viruses by voiding those exclusions, would immediately subject insurers to claim payment liability that threatens solvency and the ability to make good on the actual promises made in existing insurance policies.”

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