By James Ballot, Senior Advisor, Strategic Communications, Triple-I
It’s been more than eight months since COVID-19 first struck the U.S., and millions of small business owners are still hurting. All the while, a few plaintiffs’ attorneys are treating the pandemic as another opportunity to profit from costly insurance litigation.
At a time when businessowners are looking for leadership to bring much needed financial support, these same attorneys are hoping legislators and judges will help them retroactively rewrite business income (interruption) (BI) insurance contracts. One key figure in this effort is John Houghtaling, a New Orleans-based plaintiffs’ lawyer who was featured in a recent Bloomberg Businessweek profile.
Yet, despite the efforts of Houghtaling and others, courts across the country have to date overwhelmingly affirmed BI insurance policies do not cover losses resulting from the COVID-19 pandemic. And the facts supporting these decisions offer clear and unambiguous evidence indicating BI insurance policies are not designed to cover pandemic-caused business interruptions.
Adds Michael Barry, Head of Media and Public Affairs, at the Insurance Information Institute, “Not one business interruption insurance policy in the U.S. was written on the assumption nearly every business would be interrupted at the same time.” Barry adds, “This is why regulators and judges are consistently siding with insurers who argue direct physical damage to property is needed to trigger a business interruption policy.”
Irrespective of insurers’ and trial attorneys’ competing points of view, the authors of the Bloomberg Businessweek article cite the need for timely and decisive action: “A yearslong legal battle might not be much help to struggling businesses,” the article states. As the end of 2020 approaches, litigation seeking to compel insurers to cover pandemic-related income losses appears likelier to further the lawyers’ interests as opposed to those of businessowners seeking financial support.
Other potential solutions are on the table, most of which are taking shape around the idea that the federal government is the only entity with the reach and financial resources to help businesses recover from an event the magnitude of a global pandemic. On this point, a growing consensus of legal scholars and insurance industry experts concur, with Stefan Holzberger, AM Best chief rating officer, concluding in commentary to a recent report, that “pandemic risk does not afford insurance companies any geographic diversification due to its global nature … Only a governmental program, or perhaps a public-private partnership, could provide the backstop sufficient to compensate for lost revenue to businesses.”
As a counterpoint to statements made by Houghtaling and other plaintiffs’ attorneys, Sherman Joyce, President of the American Tort Reform Association presents a competing vision for how American businesses can unite to recover economically from the COVID-19 pandemic: “Americans’ elected representatives — not the trial bar — should have the authority to regulate business within the U.S.” Joyce continues, “The courts must restore that balance of power by rejecting the dreaded return of regulation through litigation.”