Following in the footsteps of numerous state legislatures that are attempting to compel insurance companies to retroactively cover COVID-19 related business income losses, the Federal government may be taking action. A discussion draft of a bill that would establish a Federal program is being developed.  The program, currently named the “Pandemic Risk Insurance Act of 2020”, would provide assistance to the insurance industry when losses exceed $250 million and would be capped at $500 billion in a calendar year.  According to the American Property Casualty Insurance Association,  estimated losses in the United States are between $220 and $383 billion per month for small business alone with the insurance industry potentially handling 30 million claims.

At last Friday’s White House briefing, the President was asked a question about business debt and his response addressed the insurance industry’s negative response to Business Interruption claims. President Trump, noting that companies paid premiums for this coverage for many years and have an expectation of coverage, suggested that insurance companies whose policies did not have an exclusion should pay “if its fair.”  The White House, however, has not taken a position on any potential Federal or State legislation to compel carriers to honor these claims.

While some states grapple with legislation to compel carriers to pay BI claims, others, like California and New York recently issued directives to insurance companies doing business in their states to send notices to policy holders that explain the Business Interruption coverage parts of their insurance policies. These notices essentially mirror the denial letters that the carriers have been reflexively sending out and do nothing more than explain why coverage is not available under their policies.

We continue to recommend that all businesses with Business Interruption insurance put their carrier on notice of a claim and compile the documents necessary to support the claim in the event there is a change in the law.  That documentation would include:

• Historical and current annual financial statements
• Federal and state annual tax returns
• Monthly profit and loss statements
• Budgets, forecasts, or projections done prior to and after the event
• Monthly bank statements
• Inventory reports
• Payroll records
• Invoices and purchase orders
• General ledger accounts established to account for any expenses related to the loss such as additional payroll, shipping, temporary facilities, etc.
• Documentation to support extra expenses including receipts, invoices, time sheets, advertising costs, etc.