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President Donald Trump on Friday suggested insurers should pay some business interruption claims related to the coronavirus pandemic.
Mr. Trump made the comments on the same day that a group of Republican senators wrote to him to express concerns about various state lawmakers introducing bills seeking to mandate business interruption coverage for virus-related losses.
During the daily White House Coronavirus Task Force Update, Mr. Trump said that while some insurance policies specifically exclude pandemic coverage, “in a lot of cases, I don’t see it. I don’t see reference, and they don’t want to pay up. I would like to see the insurance companies pay if they need to pay.”
Many companies, including restaurants and others, have paid business interruption premiums for years “and then when they finally need it, the insurance company says, ‘We’re not going to give it.’ We can’t let that happen.”
Mr. Trump’s comments come after more than a dozen commercial policyholders, including restaurants in several states, have sued their insurers seeking business interruption coverage. In many cases, insurers have indicated that coverage is not triggered because direct physical damage is required for the coverage to kick in. The policyholders assert that contamination by the virus and the government restrictions on their businesses constitute physical damage.
In a statement responding to Mr. Trump's remarks, R.J. Lehmann, director of finance, insurance and trade policy at conservative think tank The R Street Institute, said the president was "misinformed about the scope and nature of business interruption coverage."
The 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," Mr. Lehmann said.
Also on Friday, seven Republican senators on the Senate Banking Committee wrote to Mr. Trump saying that insurance legislation introduced in various states “would potentially undermine our understanding of contractual obligations.”
Lawmakers in several states have introduced bills that would force insurers to pay coronavirus-related business interruption claims.
Sens. Tim Scott of South Carolina, Mike Crapo of Idaho, Thom Tillis of North Carolina, Mike Rounds of South Dakota, Pat Toomey of Pennsylvania, Ben Sasse of Nebraska and David Perdue of Georgia wrote that attempts to “rewrite” insurance contracts would undermine the insurance system.
“Because (business interruption) insurance typically does not cover pandemics absent an explicit rider, insureds under these policies were never charged premiums for that risk and insurers did not reserve for or hold capital against the potential future loss,” the letter states.
Most policies written after SARS outbreaks in 2002 and 2004 include communicable disease exclusions, the senators wrote.
The senators also questioned the need for a government backstop to respond to business interruption losses from future pandemics.
A draft bill that would provide a government backstop to cover business interruption claims from a future pandemic is circulating on Capitol Hill.
“We remain very skeptical that any such proposal would be able to provide the appropriate coverage at an appropriate price for our nation’s small businesses. We look forward to having a more substantive debate on this important topic once this current crisis has been resolved and when policymakers are better able to examine the needs of our small businesses and the potential policy options,” the senators' letter states.
More insurance and risk management news on the coronavirus crisis here.