President Donald Trump has staked out his position in a legal battle over business-interruption claims: Unless the policy excludes pandemics, insurers should pay.

Trump spoke about the issue for a minute and a half during his daily coronavirus task force briefing last Friday after a reporter asked if he is concerned about growing credit card debt resulting from business closures. The president said that he was and that the White House has spoken to credit card companies about reducing interest rates.

Then he moved on to the subject of business-interruption insurance.

“You have people that have never asked for business-interruption insurance and they have been paying a lot of money for a lot of years for the privilege of having it and then when they finally need it, the insurance company says ‘We’re not going to give it,'” Trump said. “We can’t let that happen.”

Trump said that he had purchased business-interruption insurance for some of his businesses when he was in the private sector.

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“I’m very good at reading language,” Trump said. “I did very well in these subjects, OK? I don’t see pandemic mentioned. Now, in some cases it is; it’s an exclusion. But in a lot of cases I don’t see it. I don’t see reference that they don’t want to pay up.

“I would like to see the insurance companies pay if they need to pay, if it’s fair. And they know what’s fair. And I know what’s fair. I can tell you really quickly.”

Lawsuits Filed

Trump is aware that several lawsuits have been filed asking the courts to declare that insurers are liable when they are forced to close because of orders by civil authorities in response to the pandemic, according to one lawyer.

New Orleans attorney John W. Houghtaling II told Claims Journal on Friday that he and several clients — including renowned chefs Thomas Keller and Wolfgang Puck — participated in a telephone meeting with the president on March 29.

Houghtaling said the White House contacted a group of business owners that had formed to protest insurance claim denials two days prior to that meeting. He said he is not surprised that Trump was interested in the lawsuits, or that he spoke out in defense of businesses that have been denied business-interruption coverage even when the policy does not exclude viruses and pandemics.

Houghtaling said the insurance industry’s play book after every disaster is to grasp for legal theories that allow them to deny valid claims. He said he hopes Attorney General William Barr will join Trump in denouncing that tactic. He said the restaurant industry employs more people than any other sector of the economy.

“The president saying I’m not going to let them get away with it, I’m proud of that,” he said.

Houghtaling refused to say whether he is a Republican or a Democrat. He said he is “non-partisan” — as is the question of whether insurers should pay legitimate claims. Both Republican and Democrats supported him when he litigated against insurers that denied claims after natural disasters, he said.

“What they all had in common is their constituents lived after a disaster,” Houghtaling said. “They collected premiums and when the disaster happens, they withhold money.”

Houghtaling filed what may have been the first lawsuit addressing the question of whether insurers are liable for damages caused by coronavirus closure orders. On March 16, he petitioned a Louisiana state court to declare that the Oceana Grill in the New Orleans French Quarter was covered by the business-interruption provision of its policy, which does not exclude viruses or pandemics.

Houghtaling is also participating in a California lawsuit filed by chef Thomas Keller seeking payment for the closure of his French Laundry and Bouchon Bistro in the Napa Valley. He said Keller paid $350,000 extra on his insurance policy in exchange for a provision that specifically included virus claims, but the claim was denied.

Defense attorneys and advocates for the insurance industry say that insurers generally are not liable for business interruptions caused by closures that are ordered as a precaution to prevent the spread of contamination. They argue that coverage is triggered only when a property, or an adjoining property, is physically damaged.

The American Property and Casualty Insurance Association issued a statement on April 6 saying that the insurance industry cannot afford to pay such claims. The surplus for home, auto and business insurers combined amounts to $800 billion. The total closure costs for all businesses with 100 or fewer employees (not those that have business-business-interruption insurance) is estimated to be $431 billion per month,” said APCIA CEO David A. Sampson.

“Pandemic outbreaks are uninsured because they are uninsurable,” Sampson said.

R Street, a public policy organization that supports free markets, issued a statement after the coronavirus briefing saying that Trump is “misinformed.”

R.J. Lehmann, director of finance, insurance and trade for the non-profit group, said business-interruption coverage is designed to provide revenue protection for businesses whose properties suffer physical loss from natural causes like fires or windstorms or human-caused events like vandalism or terrorism.

“Standard commercial insurance policies typically do not even provide business interruption coverage for power loss unless there is demonstrable damage to the insured property,” Lehmann stated. “There may be unusual cases in which nonstandard contracts contain language that would cover pandemic-related shutdowns, but the industry as a whole has intentionally excluded this risk because it is far too correlated across geographies and sectors.”

Lehman said any attempt by government to rewrite the terms of coverage restrictively threatens the solvency of the insurance industry and its ability to pay legitimate claims.

“That includes both claims that do arise from COVID-19, such as workers’ compensation claims for medical workers and first responders, and unrelated claims for wildfires, hurricanes and other disasters that we can expect in the months ahead,” he said.