Recently, the Houston Business Journal reported on the litigation trend against insurers attempting to get business interruption (BI) policies to cover losses from the coronavirus pandemic. The piece features insights from Insurance Information Institute CEO and President Sean Kevelighan explaining why the attorneys-driven trend is a misguided effort to alter existing contracts and why the solution lies in a government-backed pandemic relief.
According to Kevelighan:
- Retroactively altering BI insurance contracts to cover pandemics is unconstitutional and would put the industry's solvency at risk, jeopardizing its ability to meet existing promises to policyholders. "He [Kevelighan] argues that retroactively altering insurance contracts to this extent is unconstitutional and would bankrupt the industry within a matter of months. 'I would say the litigation trend is looking more towards language manipulation attempts as opposed to trying to retroactively fit contracts, thankfully,' Kevelighan said."
- As pandemics are uninsurable, only the federal government has the financial capacity to provide the critical relief that businesses need. "Kevelighan asserts that much of the relief will need to come from the government — not insurance companies. For instance, tens of thousands of Houston-area businesses were approved for billions of dollars in Paycheck Protection Program loans, according to Small Business Administration data. 'We have to establish that since global pandemics are largely uninsurable, this needs to be managed, and the federal government needs to be that primary provider of relief,' Kevelighan said."
As a reminder, standard BI insurance policies necessitate a direct physical damage to property. The insurance industry remains committed to keeping its promises to Main Street and supporting its communities during these challenging times.
For more information and resources, go to fairinsure.org.