The legal action over business interruption insurance stemming from the new coronavirus is shaping up to be a huge struggle.
Two motions filed on April 20 asked the Judicial Panel on Multidistrict Litigation to consolidate federal lawsuits accusing insurance companies of avoiding claims by businesses shut down by government orders, according to an article published on Reuters.
The consolidation brief argues that all of the complaints filed so far raise two common questions: does coronavirus cause physical damage or property loss, and does insurance coverage kick in when the virus is present on or near a policyholder’s property?
There is no guarantee the cases will be allowed to consolidate. University of Minnesota law professor Daniel Schwarcz told Reuters there are immense complications since insurance law questions are matters of state law, and every state has a unique precedent.
Still, another high-profile participant weighed in on business interruption insurance in early April when President Donald Trump said he “would like to see the insurance companies pay if they need to pay.”
During one of the White House coronavirus briefings, the president said there’s “an exclusion” for pandemics “in some cases,” but “in a lot of cases, I don’t see it,” according to Marketwatch.
“You have people that have never asked for business-interruption insurance, and they’ve been paying a lot of money for a lot of years for the privilege of having it,” President Trump said during the briefing. “And then when they finally need it, the insurance company says, ‘We’re not going to give it.’ We can’t let that happen.”
A group of U.S. House lawmakers has other ideas on how to handle the questions around business interruption insurance. They have introduced a bill, H.R. 6494, to compel insurers to pay pandemic-related business interruption losses.
“Businesses who have purchased business interruption insurance in good faith and are forced to close their doors because of a major event and through no fault of their own deserve to have their claims honored,” bill sponsor Rep. Mike Thompson (D-CA) said in a statement.
Over the past few weeks, Louisiana, Massachusetts, New Jersey, New York, Ohio, and Pennsylvania have proposed similar legislation to require insurers to pay for pandemic business interruption claims.
The property-casualty insurance industry maintains that business interruption policies should not cover pandemic-related losses.
“Standard commercial insurance policies offer coverage and protection against a wide range of risks and threats and are vetted and approved by state regulators. Insurance coverage works by spreading risk, but that model simply cannot account for a situation in which losses are catastrophic and nearly universal,” insurance trade groups wrote in a letter to federal lawmakers in response to H.R. 6494.
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