Triple-I CEO Sean Kevelighan today joined legislators and legal experts to discuss proposed measures that could retroactively rewrite business interruption insurance policies.
“The insurance industry is applying forward-thinking solutions to take care of its customers, communities, and employees during the COVID-19 crisis,” Kevelighan said, citing more than $10 billion so far returned to customers through premium relief; $200 million in charitable donations; and insurers pledging not to lay off employees during the crisis and implementing innovative solutions to conduct daily operations while respecting social distancing. “We’re deeply engaged in mitigating the economic impact of this pandemic.”
But the industry can only do these things – while keeping its promises to policyholders and preparing for impending catastrophes – if policyholder surplus isn’t eliminated, as it could be if some of the proposed legislative “solutions” were enacted.
Legislation has been discussed or introduced in Louisiana, Massachusetts, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, and South Carolina that would retroactively enact business interruption coverage into existing policies despite an absence of the physical damage required in property policies and/or express exclusions for communicable diseases in those policies.
Kevelighan explained how policyholder surplus provides a cushion that enables insurers to meet their obligations, even when large, unexpected catastrophes occur. He showed how retroactively rewriting insurance contracts could make it impossible for insurers to play their critical role as “financial first responders.”
The scenarios he discussed could cost the industry $150 billion and $380 billion per month – “quickly eliminating the surplus it has taken the industry centuries to accumulate.”
Kevelighan made his remarks during a webinar sponsored by the National Council of Insurance Legislators (NCOIL) and the Rutgers Center for Risk and Responsibility at Rutgers Law School. Other panelists included NCOIL President and Indiana Rep. Matt Lehman; New Jersey Assemblyman Lou Greenwald; and Jay Feinman and Adam Scales, Professors of Law at Rutgers Law School and Co-Directors of the Rutgers Center for Risk and Responsibility.
The panelists all expressed support for the creation of a COVID-19 Business Interruption and Cancellation Claims Fund, similar to the 9/11 Victims Compensation Fund enacted by Congress in 2001, for businesses suffering from costs related to the interruption of their businesses, as well as the many associations that have had to cancel events. Funded by the federal government and operated by a special federal administrator, it would facilitate distribution of federal funds and liquidity to impacted businesses during this time of incalculable business interruption.
Click here to view the presentation.