Louisiana lawmakers have put aside an attempt to make insurers offering business interruption insurance to cover losses caused by the COVID-19 pandemic, according to a report by New Orleans City Business and the Associated Press.
Amid concerns that it could seriously damage the state’s insurance industry, Sen. Rick Ward (R-Port Allen) scrapped the proposal he had authored with the hopes that business owners could get compensation for the business interruptions caused by COVID-19, although this type of interruption isn’t typically covered in that type of insurance.
Business interruption insurance typically covers interruptions when physical damage forces a business to close. These policies are not written to cover “any loss of business or business interruption for the duration of a declared emergency,” as Ward’s bill sought to have covered. Ward wanted to require insurance companies to compensate for losses due to coronavirus as of March 11 for any business that had that type of insurance, despite exemptions that might prohibit coverage for that type of incident.
“What the vast majority of business owners have found out was that a shutdown due to a virus or pandemic was an exclusion from coverage. Sometimes extreme circumstances require some extreme measures to be taken,” Ward told the Senate Insurance Committee. “In order to protect some of these businesses that are struggling at best and at worst are going bankrupt, that is something we should consider.”
Many business owners who have sought compensation from their business interruption insurance policies have been surprised to learn that the crisis caused by the coronavirus does not qualify.
That includes Sen. Kirk Talbot, the chair of the Senate Insurance Committee, who does own a business. But he raised questions about how lawmakers could get insurance companies to pay for those losses – particularly for business owners who did not pay for that coverage. The Republican senators pushed back against trying to make insurance companies provide the coverage, because the fine print of these policies notes exclusions, whether the business owner notices that in the fine print or not.
The proposal was seen as controversial because of the retroactive coverage requirement, and many suggested that it could cause massive problems for the insurance industry if the bill was passed as originally written.
Insurance Commissioner Jim Donelon worried that it would bankrupt the insurance industry, and that insurance companies wouldn’t be able to afford the results if the proposal went through.
“I think premiums would be outrageous if they did cover those things, so I don’t think people would have had the coverage anyway,” said Sen. Mike Fesi (R-Houma).
In the face of those objections, Ward rewrote the measure and removed the retroactive coverage requirement. That new measure requires business interruption policies to list the exact types of incidents that are excluded from coverage so that business owners were explicitly notified of those exemptions, and no longer requires insurance companies to provide coverage due to the pandemic retroactively.
The Senate Insurance Committee sent the new measure to the full Senate without objections.