Late on March 25, the U.S. Senate passed H.R. 748, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, by a vote of 96-0. This bill is the third COVID-19-related bill that Congress has passed, and others are likely to follow.

The Senate unanimously approved the $2 trillion emergency package, which is intended to provide urgently needed aid to several sectors of the economy. House Democratic leadership has said the House plans to take up the measure on the morning of Friday, March 27, using rules that will not require members who have already gone home to return to Washington. President Trump has said he will sign the bill.

The CARES Act includes assistance to state and local governments and $1,200 to individuals earning up to $75,000 annually. These grants gradually get lower for higher earners and are not available to those with incomes over $99,000. Families will also receive $500 per child. The bill includes a major expansion of unemployment aid in the form of an additional 13 weeks on top of the unemployment period granted at the state level, and a four-month, $600 increase in existing unemployment benefits (which vary across states); funding for hospitals and COVID-19 vaccine research; loans to airlines; loans for companies deemed critical to national security; and assistance, overseen by Congress and the Department of Treasury, for large businesses.

Small business provisions

The bill also has provisions to help small businesses, providing loans for those with 500 employees or less. These loans may be converted to grants and partially forgiven if the businesses maintain the average size of their full-time workforce. The program is designed to ensure that small businesses do not lay off employees because of the social distancing required by the pandemic and the resulting economic downturn. It will be run by the Small Business Administration (SBA), and the loans, which will be guaranteed by the federal government, will convert to grants, with the underlying debt forgiven, if the funds are used for payroll costs, mortgage interest, rent, and utility payments, and if the recipient businesses retain their employees. The interest payments will survive any underlying loan forgiveness.

The bill also includes a 50 percent refundable payroll tax credit on employee wages and a delay in employer-side payroll taxes for Social Security until 2021 and 2022. It also makes some sole proprietors and other self-employed workers eligible for the expanded unemployment insurance benefits included in the legislation.

Next Steps:

State and federal policymakers have begun to suggest that insurers retroactively recognize financial losses triggered by the COVID-19 outbreak as part of their customers’ business interruption (BI) coverage, despite the fact that nearly all BI coverages explicitly exclude non-physical losses like those attributable to COVID-19.

PIA National is very concerned about the precedent that would be set by allowing state or federal government authorities to effectively rewrite privately negotiated contracts by “reading in” coverages that are explicitly excluded from policies. We are working to discourage such proposals and are in the process of developing a proposal to provide a solution for small businesses suffering economically from COVID-19-related closures, without upending existing tenets of contract law. PIA National has been and will continue to be heavily engaged in the development of several alternatives that are intended to directly assist insurance agents and other members of the insurance community.

PIA National will update members on both legislative developments and insurance-specific policy proposals as this process continues.