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La. lawmakers scrap business interruption bill

Posted On: May. 13, 2020 2:23 PM CST


Louisiana lawmakers on Wednesday scrapped a bill that would have forced insurers to cover retroactive business interruption claims due to COVID-19.

However, state senators agreed to rewrite and amend Senate Bill 477 to allow a proposal requiring insurers to clarify exclusions on business interruption policies to move ahead.

The “vast majority” of business owners have found out that “a shutdown due to a virus or pandemic” is excluded from coverage, Republican Sen. Rick Ward, sponsor of S.B. 477, told the Senate Insurance Committee hearing.

“Sometimes extreme circumstances require some extreme measures to be taken,” Sen. Ward said.

“In order to protect some businesses that are struggling at best and at worst going bankrupt, it’s something we should consider,” he said.

However, Republican senators, many of whom are small-business owners and were not covered for pandemics, expressed concerns. If insurers “did not collect for that incident how can they go back retroactively and make a payment,” said committee Chairman Sen. Kirk Talbot.

“Premiums would be outrageous if they did cover those things and probably nobody would have had the insurance anyway,” Sen. Mike Fesi said.

Louisiana Insurance Commissioner Jim Donelon told lawmakers the bill was “extremely dangerous.”

“The National Association of Insurance Commissioners has told Congress that if they do this, if they pass a bill, of which there are several pending, the industry can’t afford it and the industry will bankrupt,” Mr. Donelon said during the hearing.

The scrapping of the Louisiana proposal follows last week’s decision by the Council of the District of Columbia not to go ahead with a proposal to force insurers to provide retroactive business interruption coverage on small-business COVID-19 claims.

A number of states have introduced bills looking to force insurers to provide retroactive coverage. However, these have received strong pushback and raised concerns among commercial insurance buyers and insurer groups.