David Sampson of the American Property Casualty Insurance Association (APCIA) has taken a strong lead in trying to deter politicians from attempting to enact laws requiring insurers to pay business interruption claims when virus issues are not written into a policy.
At the time this is written on Thursday, April 2nd, only members of Legislatures in New York, Massachusetts, Ohio and New Jersey have introduced bills. More will no doubt have happened by the time you read this.
In an interview with the Boston Globe about Massachusetts Sen. James Eldridge’s bill, Sampson said the legislation is seriously “constitutionally flawed” and if passed could be seriously disruptive to the industry and ultimately to consumers.
Laura Meyer Gregory is a partner at Sloane and Walsh LLP in Boston, Massachusetts. She also questions whether such legislation would be found constitutional and told the Globe, “The bill, if passed with the current terms, would likely bankrupt some insurers and cause others to discontinue writing insurance policies.”
Barton Gillman is a law firm in Rhode Island. One of its partners, Kristen Whittle agrees with Gregory. “This COVID-19 situation is a risk that I don’t think anyone could have possibly foreseen. I’m not insensitive to the plight of businesses. Everybody is struggling with this, but to target the insurance industry to absorb the loss, I think, is the wrong approach here.”
Eldridge said he — and others supporting the bill — aren’t trying to attack the insurance industry. “I’d like to see us come together and agree on the details in the bill, but my focus right now is on how to support restaurants, their workers and other small business.”
The Massachusetts bill will let insurers go to the state’s insurance department to get reimbursed. Then they’d be required to later pay back what the state gave them. That is another point that insurers are going to resist.
So does any of this or really fly? No.
A report from Morgan Stanley says property and casualty insurers are mostly insulated from the business losses from COVID-19 and the whole business interruption crisis is overblown.
“We remind that language in commercial property policies is clear on requiring physical property damage from a covered peril to trigger a BI claim, and pandemic coverage is also usually excluded from standard policies,” the report said.
Morgan Stanley’s report emphasized that losses that are actually covered will be minimal and won’t have a huge impact on the industry.
The Boston Herald