A coalition of business groups is urging Congressional leaders to support proposed legislation that would compel insurers to offer coverage for COVID-19-related losses.
An April 20 National Retail Federation letter calls for the creation of a pandemic risk insurance program, similar to the Terrorism Risk Insurance Program (TRIA) following 9/11.
“While it is imperative to take immediate action to address the current economic crisis, we also believe that Congress must take swift action and begin contemplating a solution to provide all businesses protection against future pandemic risk, which, we should anticipate, could come as early as this fall,” the letter states.
The “Pandemic Risk Insurance Act of 2020” (PRIA) would create federally backed insurance for losses exceeding $250 million nationwide. A spokesperson for the bill's chief sponsor, Rep. Maxine Waters (D-CA), did not immediately return a request for comment.
“A federally insured pandemic risk insurance program would provide businesses of all sizes with the certainty that they need to renew leases, invest in real estate, order inventory, plan for capital improvements, and hire and re-hire workers in the coming months,” the letter states.
While PRIA would help with future losses, hundreds of lawsuits remain pending over unpaid business interruption claims resulting from the current pandemic.
“At the federal level, and there are many cases at the state level as well, the ‘Judicial Panel on Multidistrict Litigation’ (JPML) is overseeing a request to have all related federal cases joined together and transferred to a single federal district court for pretrial proceedings,” Angelo Amador, senior vice president of legal advocacy at the National Restaurant Association, told the Northern California Record by email.
“The JPML recently rejected a motion to expedite the proceedings and said it will not decide whether to create one ‘Multi-District Litigation’ (MDL) case until July at the earliest.”
Amador said what appears to be the first motion to dismiss a business interruption claim was filed Monday in U.S. District Court for the Middle District of Florida [Prime Time Sports Grill Inc. v. Certain Underwriters at Lloyd’s London], and may show how insurance carriers will argue similar cases.
“The essence of the insurers’ arguments and the need for PRIA are clearly highlighted in footnote 3 found on page 11, which states: ‘Compelling insurers to subsidize the economic impact of the COVID-19 pandemic, with coverage neither contemplated by the policies nor purchased by the insureds—even if feasible on a nationwide scale—would only lead to coverage becoming unaffordable and realistically unobtainable for new, recovering, or existing businesses moving forward,’” Amador said.
“While we disagree with the statement that the ‘coverage [was] neither contemplated by the policies nor purchased by the insureds,’ we do understand that, like terrorism insurance before it, ensuring insurance companies live up to their end of the bargain and provide coverage would ‘lead to coverage becoming unaffordable and realistically unobtainable for new, recovering, or existing businesses moving forward,’ which is the issue PRIA would fix, like TRIA did for terrorism insurance,” Amador said.
“Still, PRIA does not cover the current issue and I would note that many insurance applications even expressly asked whether the business has had a pandemic event or closed down by any public health authority or civil authority in the last five years—further increasing the expectation of coverage in case of either situation.”
Whether many restaurants ever reopen may depend on the outcome of their business interruption claims.
“We support PRIA, it is good for the future, but we need a fix now,” Amador said.