It's been more than six months since the pandemic first struck our economy, and millions of small business owners are still hurting. Yet a few trial attorneys see this disaster as an opportunity to line their pockets through costly insurance litigation.
Here's Exhibit A of what we're talking about: Plaintiffs lawyer John Houghtaling's recent profile in Bloomberg Businessweek, a piece which touts his Lamborghini collection, lavish dinner parties, and multi-million dollar real estate.
Here are the facts:
- Global pandemics are simply uninsurable. As opposed to epidemics and natural disasters, pandemics occur on a global scale, making risk pooling impossible. Business interruption (BI) premiums were not priced to factor in the "estimated $4.5 trillion global output loss inflicted by COVID-19 and its handling in 2020" according to the Geneva Association. Property/casualty insurers would have to collect BI premiums for 150 years to cover that cost.
- This issue will not be solved in the courts. The majority of business interruption contracts expressly require the necessity of physical damage and explicitly don't cover losses due to viruses or pandemics. So far, at least 17 judges in the U.S. have upheld these contract stipulations and dismissed suits against insurers. Despite this reality, trial attorneys continue to pursue expensive lawsuits against insurers that will not be won by their plaintiffs.
- The insurance industry needs its policyholder's surplus to fulfill their commitments to policyholders for covered risks. We are still in the middle of hurricane season in the southeast U.S. and there continue to be wildfires on the west coast. If the insurance industry is forced to spend the policyholders' surplus on uncovered COVID-19 losses, that will further destabilize the economy because there will be no money left over for covered losses for physical damage from hurricanes, wildfires, tornadoes, and riots.
- No matter which policymakers are elected to serve in 2021, we need a viable government-backed solution to provide immediate relief to business owners if America's economy is to recover. There are several proposed solutions out there already, including the Business Continuity Protection Program (BCPP) and the Pandemic Risk Insurance Act (PRIA). You can read about the key principles necessary for a forward-looking government-backed pandemic recovery solution here.
To put it simply, litigation is a trend driven by greedy attorneys, and a misguided effort to alter existing contracts. The only true solution is government-backed pandemic relief. If you'd like to discuss this pressing issue with insurance industry experts, please reply to this email to reach the Insurance Information Institute.
For more information and resources, visit fairinsure.org.