Senators Caution Against Retroactive Business Interruption

As part of PIA National’s advocacy work on legislation related to the coronavirus, we have worked with a group of senators on a letter that was sent to the White House today, asking the administration to reject any proposal in upcoming coronavirus legislation that would undermine existing insurance practices, namely the retroactive finding of business interruption (BI) coverage in commercial insurance contracts with provisions that expressly exclude viruses or pandemics. Senator Tim Scott (R-SC) led the effort that has the support of  seven senators, including the Chairman of the Senate Banking Committee, Mike Crapo (R-ID).

PIA National strongly opposes proposals that have been introduced in state legislatures and suggested by some members of Congress to statutorily revise BI insurance provisions and make them retroactive to cover losses caused by the coronavirus. BI provisions typically do not cover losses resulting from risks like the coronavirus, and state or federal authorities should not override the mutually agreed-to provisions of an otherwise legal business contract entered into by two consenting parties. Additionally, BI provisions customarily require that any loss be a direct result of physical damage to or loss of property. Besides, such a response would not help all businesses; only one in three small businesses even has business interruption coverage.

Mandating retroactive BI coverage via statute would call into question the reliability of commercial contractual relationships and threaten the financial stability of the insurance sector. Finally, the downstream effects of such a law, which could set a precedent for legislative rewriting of all kinds of contracts, could be unintentionally catastrophic across economic sectors.

PIA National will continue to work with Congressional allies and the administration on commonsense solutions to provide economic relief to U.S. businesses without undermining existing insurance contracts and adding to instead of ameliorating the nation’s existing economic crisis.