Sen. Ben Nelson: Taking Insurers To Court Won't Help Business. Government Must Step In.
July 20, 2020

Real Clear Markets published an opinion piece by former U.S. Senator Ben Nelson (D-NE) today on the urgent need for the federal government to provide the critical relief needed by America’s small businesses. Senator Nelson previously served as the Director of the Nebraska Department of Insurance and as the Chief Executive Officer of the National Association of Insurance Commissioners (NAIC) from 2013 through 2016, making him a knowledgeable expert on this topic. 

In his opinion piece, Sen. Nelson recognizes:

You can read the full piece here and it is also copied below.

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Senator Ben Nelson: Taking Insurers to Court Won’t Help Business. Government Must Step In

The late, great Kenny Rogers had some pretty good advice that plaintiffs’ attorneys could heed today about knowing when to hold’em and when to fold’em. As a lawyer and former insurance commissioner and Senator, it is clear to me what our businesses don’t need right now: expensive, lengthy litigation. If we’re serious about getting meaningful relief for businesses across the country, it’s time for the trial bar to stop gambling and fold on these frivolous lawsuits against insurers that waste small businesses’ time and resources and get behind a substantial federal response to the economic hardship brought on by the COVID-19 pandemic.

Amidst the chaos of recent months, there have been no shortage of distractions preventing businesses from getting the help they need, including the ongoing litigation surrounding business interruption (BI) insurance policies. Since the first lawsuit was filed in Louisiana in March, hundreds of lawsuits have followed across the U.S., and more are expected to come. But these lawsuits are not only costly and drawn-out, they are also a distraction from the most important issue at hand: bringing key stakeholders together to find a viable solution to support businesses in the upcoming recovery. BI litigation is not only unproductive and unnecessary, it is also a clear attempt to profit off small business owners and disrupt progress toward sustainable, government-backed solutions to the economic challenges our country is facing.

Currently, BI policies are only activated when there is proof of direct physical property damage, The COVID-19 virus doesn’t trigger that claim. This standard was affirmed by a recent letter sent to the U.S. House of Representatives’ Small Business Committee by the National Association of Insurance Commissioners, explaining the pandemic “has highlighted that many existing BI policies have specific exclusions for viruses or other diseases, and coverage is generally only triggered by actual physical damage. Therefore, these policies were generally not designed or priced to provide coverage for claims arising from COVID-19.”

It’s important to keep in mind the decision to exclude pandemics from standard policies is not new. Following the SARS pandemic, the International Organization for Standardization, along with state insurance regulators and trade groups, introduced a virus policy exclusion in 2006 to ensure the solvency of the insurance industry wouldn’t be threatened by future pandemics like the one we face today.

The bottom line is, and as we are seeing now, global pandemics are uninsurable. The cost of underwriting these pandemics would be massive for insurers—nearly $400 billion per month—which would make such coverage extremely, and likely prohibitively, costly for small business owners. Requiring insurers to pay out for uncovered claims would be unfair to other policyholders who already paid to have their claims insured and would threaten the ability of the industry to serve policyholders and lead to the collapse of the industry, especially as we enter the busy hurricane and wildfire summer season.

All that is to state the obvious: only the federal government has the financial capacity to provide the critical relief small businesses need today. I’ve witnessed first-hand debates regarding whether the government should intervene during an economic crisis. Given the scale of this pandemic and economic recession, a federal response is critical. The government has already taken steps to help provide safety nets for Americans and industries—from stimulus checks to bailout money—and continuing to support small businesses in need is merely the next step.

I know the pain many business owners in Nebraska and across the U.S. are experiencing. The insurance industry has shown its commitment to helping customers get back on their feet where possible, but now is the time for Congress to do its part and get the country back to work. We can’t waste valuable time and resources on endless litigation that is unlikely to bring businesses the relief they need. With the right government-backed solutions, we can secure a much-needed safety net for business owners today and in the future.

E. Benjamin Nelson is a former U.S. Senator and Governor for the State of Nebraska, as well as the Director of the Nebraska Department of Insurance. He also served as the Chief Executive Officer of the National Association of Insurance Commissioners (NAIC) from 2013 through 2016. Sen. Nelson currently serves as CEO of Insurance Care Direct, a health and life insurance agency, and consults for other industry groups.