U.S. Rep. Carolyn Maloney, D-New York, has announced the introduction of the much-anticipated Pandemic Risk Insurance Act of 2020, a federal backstop for pandemic-related business interruption insurance, which is modeled after the Terrorism Risk Insurance Act. According to a report in the Claims Journal the bill, H.R. 7011, creates a program in which insurer participation is voluntary. Insurers who do participate would offer pandemic-related business interruption and event cancellation coverage, and they would be reimbursed by a federal backstop for some of their losses.
What the Bill States
No losses would be paid under the program until the aggregate industry insured losses exceed a $250 million aggregate trigger. The federal share of losses would be 95% of insured losses above each insurer’s deductible. The insurer deductible is defined as the value of the participating insurer’s direct earned premiums during the immediately preceding calendar year, multiplied by 5%.
The bill establishes a $750 billion annual aggregate cap for federal compensation. If losses exceed the cap, the Secretary of the Treasury is authorized to determine the allocation of pro-rate payments. The bill also includes language relating to coverage of event cancellations in addition to business interruptions.
Businesses Seriously Affected
The coronavirus pandemic has caused unprecedented damage to our economy, forcing businesses across the nation to close their doors. While insurers typically compensate some business owners when they have to shut down due to situations beyond their control such as tornadoes and hurricanes, insurers have been claiming that their business insurance policies exclude pandemics. Maloney gave the example of how New York City’s economy completely shut down after the 9/11 attacks.
At the time businesses could build back because insurance companies refused to insure properties against terrorist attacks. That led to legislators passing the Terrorism Risk Insurance Act, which helped get the economy moving again. Maloney said she hopes the Pandemic Risk Insurance Act will do the same thing for businesses affected by COVID-19.
COVID-19 Business Interruption Lawsuits
If you are a business whose claim has been denied, there are still plenty of other avenues you can take such as filing a COVID-19 business interruption lawsuit. It is important to remember that the verbiage of many insurance policies is ambiguous. Most policies are open to an interpretation that should allow for businesses to be compensated for losses incurred as a result of interruption due to the pandemic. Our consumer rights lawyers at Bisnar Chase are committed to fighting for the rights of businesses, which are the lifeline of our economy.