Business Income

Politicians Push Insurers to Cover Business Losses - President Trump, Rep. Jayapal weigh in business interruption insurance

Insurers are starting to take heat in Washington, D.C., over denials of claims for business income losses tied to government-ordered shutdowns.

In a letter Monday viewed by The Wall Street Journal, U.S. Rep. Pramila Jayapal (D., Wash.) asked insurance chief executives to justify refusals to pay out on “business interruption” and related coverages in policies held by small and midsize businesses.

President Trump said on Friday that restaurateurs told him they paid for business-interruption coverage for decades and “they’ve never needed it. All of a sudden they need it” and their insurers “don’t want to pay up.”

Increasingly desperate small businesses hurt by the spread of the novel coronavirus are seeking help wherever they can find it, filing claims totaling potentially hundreds of billions of dollars.

Business owners’ frustrations are reaching the nation’s capital partly because some other avenues aren’t working, at least for now. More than a dozen policyholders have sued their insurers, but those actions could take months just to get hearing dates, lawyers said. Courts themselves have limited operations under the shelter-in-place orders covering much of the nation, they said.

The federal government historically has had a limited role overseeing the industry, though it runs crop, flood and terrorism-backstop insurance programs.

Some insurance departments in the state-regulated industry aren’t holding out much hope for policyholders, with postings on their websites detailing common policy provisions that work against Covid-19 payouts. The National Association of Insurance Commissioners, which sets standards for state departments, has said that policies generally weren’t priced to include payments for communicable diseases and requiring payout for these claims could threaten some insurers’ viability.

Rep. Jayapal.


Rep. Jayapal, who represents the Seattle area and co-chairs the approximately 100-member Congressional Progressive Caucus, writes in her letter that, in the absence of timely insurance payments, small and midsize businesses “may be forced to lay off employees, default on debts owed, miss rent payments or close down completely.”

She urged the insurers to “set up accessible means” for policyholders to resolve coverage disputes “quickly without having to resort to time-consuming and expensive litigation.”

She said her aim is to “facilitate the commercial insurance claim process” and urges the chief executives to work with state attorneys general in resolving the disputes as one option for bypassing litigation.

The letter is addressed to the chief executives of companies including Chubb Ltd., Liberty Mutual Insurance Co.., Nationwide Mutual Insurance Co. and Travelers Cos . Rep. Jayapal asked the CEOs to provide by April 21 the language of any provision used to deny claims filed for “business income” and related coverages. She also seeks the number of acceptances and denials, and profit figures, from such coverages.

The government’s late-March stimulus package included a $350 billion small-business loan program to address some of the problems of business owners struggling to stay afloat under states’ lockdown orders and shelter-at-home directives.


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Phillip Frankland Lee, owner of Scratch Restaurants, which has several restaurants in Encino and Montecito, Calif., said he might apply for the government program “but I had a deal with the insurance company and want payment from them.”

A representative of Farmers Insurance Group told him last month his policy wouldn’t pay out for virus-related claims, he said.

“It was almost like I had been set up for a punchline,” he said. “I paid my premium every month, come rain or shine, whether business was good or not, but when I looked to them for the relief I paid for, they said, ‘We’re not honoring anything related to Covid-19.’”

A Farmers Insurance spokesman declined to comment.

His lawyer, Brian Kabateck, filed suit in a state court in Los Angeles, but said he doesn’t expect to get a court date before June because of restrictions on its operations.

Insurers say that standard policies commonly sold to small businesses sometimes include in capital letters: “EXCLUSION OF LOSS DUE TO VIRUS OR BACTERIA.” The wording was introduced in 2006 following the SARS epidemic, industry lawyers and executives say.

Wording varies in customized policies. Insurers maintain those policies’ intent is the same, but many plaintiffs’ lawyers think there is maneuvering room to successfully challenge many of these in court.

While U.S. property-casualty insurers collectively have net worth of about $800 billion, the American Property Casualty Insurance Association estimates that closure losses just for businesses with 100 or fewer employees are running $255 billion to $431 billion a month.

Those numbers “dwarf the annual premiums for all commercial property risks in the key insurance lines of $71 billion per year, or about $6 billion a month,” it said.

In his comments on Friday, President Trump said he understands that some policies contain specific pandemic exclusions, while others don’t. “I would like to see the insurance companies pay if they need to pay, if it’s fair,” he said.

The president’s comments followed a late-March phone call with celebrity chefs Daniel Boulud, Thomas Keller, Wolfgang Puck and Jean-Georges Vongerichten.

Mr. Keller’s French Laundry Partners LP has asked a state court in California for a ruling on the availability of business-interruption coverage under a policy issued by a unit of Hartford Financial Services Group Inc. A Hartford spokesman declined to comment.

In an interview, Mr. Keller said the chefs are advocating the establishment of federal subsidies for insurers that pay business-income losses to policyholders. “We don’t want to bankrupt the insurance industry,” so the notion is for the insurers and the government to share the costs.

“Morally, the insurance companies should be there for us,” Mr. Keller said. “This is a crisis of unparalleled example and they should be wanting to help.”

Write to Leslie Scism at