NCOIL URGES FEDERAL ACTION ON COVID CLAIMS
Since the start of the outbreak of COVID-19 in the U.S., the NCOIL national office has received a number of calls and communications about the legislative efforts in some states to legislate coverage for COVID-19 under the business interruption provisions in insurance policies, despite express exclusions for communicable diseases in those policies. In recognition of the fact that such legislation, if enacted, could tremendously harm the broader economy and is very likely unconstitutional, NCOIL has acted quickly and decisively to try and prevent such legislation from being enacted.
NCOIL has communicated twice in the past three weeks with every legislator on a committee with jurisdiction over insurance in every state plus every legislator where the abovementioned retroactive business interruption legislation is pending to discuss the issue of mandating the inclusion of business interruption coverage for coronavirus in policies that would otherwise exclude such coverage.
In those communications, NCOIL has stressed that while professionals and businesses are indeed facing unprecedented, dire economic challenges, we cannot compound the damage to the broader economy by forcing insurers to pay claims for which they did not contract. To do so could destabilize these insurers and render them unable to pay claims for which they did accept the risk, and did rate.
NCOIL believes that this crisis is one of the rare instances in which federal involvement in the state-based system of insurance regulation is necessary. NCOIL has reached out to Congress on several occasions to advocate for the creation of a COVID-19 Business Interruption & Cancellation Claims Fund (COVID Claims Fund). Following the tragedy of 9/11/2001, Congress enacted the Air Transportation Safety and System Stabilization Act and included within it the Victims Compensation Fund (VCF). We urge a similar solution now for the legion of businesses & professionals who are suffering from unprecedented costs from the interruption of their businesses as well as the many associations who have had to cancel their events, virtually all of whom have an exclusion in their business interruption and event cancellation policies for communicable diseases.
Furthermore, a discussion draft of legislation titled the “Pandemic Risk Insurance Act of 2020” (PRIA) which would create the Pandemic Risk Insurance Program (PRIP) to provide a federal backstop for insured pandemic losses has been circulated among Members of Congress and certain media outlets and industry representatives. While we have not had the privilege of reviewing the discussion draft, it is our understanding that PRIA would operate entirely prospectively, enabling businesses, professionals and associations to procure pandemic coverage in the future because insurers will not exclude it once a federal backstop is in place, much like terrorism insurance became available once the Terrorism Risk Insurance Act (TRIA) passed.
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