Business interruption insurance bills will help small businesses through national emergencies

The COVID-19 pandemic has affected every aspect of our lives. One of the hardest hit has been our small businesses. The mom and pop bagel store, the sporting goods store your neighbor owns, and the hardware store that gave your kids their first jobs, are all wondering how they will pay rent and pay their employees.

Both of our states, California and Pennsylvania, are under statewide stay-at-home orders. In addition to these orders, Govs. Gavin Newsom of California and Tom Wolf of Pennsylvania have ordered the closing of all non-essential businesses. This means that the suffering small businesses are going through is not because of fraud or business malpractice, but so that we can attempt to flatten the coronavirus curve and get through this pandemic.

During a time like this, most businesses would look to access their business interruption insurance, to help them through weeks of lost income. Business interruption insurance typically allows a business to protect against losses caused by the inability to operate because of a hazard or peril “insured against,” such as a fire or storm that causes physical damage to a business’ physical plant or real property.

Unfortunately, most insurance companies have stated that claims related to the COVID-19 pandemic are not covered under business interruption insurance. We are both proposing legislation that provides assurance to businesses that in the case of future national emergencies that they will never have to go through such excruciating uncertainty ever again.

Congressman Fitzpatrick’s Never Again Small Business Protection Act would require that business interruption insurance provide coverage for businesses and nonprofits for losses that stem from any federal, state, or local government-ordered business shutdown following the declaration of a future national or health emergency. This coverage would support businesses that are impacted for at least 30 days if businesses keep their employees employed and maintain their health insurance coverage.

To ensure transparency for policyholders, insurers would only be able to exclude coverage for emergencies if the insurer has received a written statement from the policyholder that affirmatively authorizes the exclusions, or if the policyholder fails to pay premiums associated with the coverage. To provide adequate stability for insurers, the government would put in place a federal backstop that would cover the costs of insurers saving the small businesses within their communities.

Finally, the Never Again Small Business Protection Act would require the Federal Advisory Committee on Insurance to conduct a study on the feasibility of a federal backstop for small business access to business interruption insurance. For the mandate on business interruption insurance to come into effect prospectively, the secretary of Treasury will need to certify that an adequate federal backstop has been put in place.

Congressman Thompson’s Business Interruption Insurance Coverage Act would ensure businesses who purchase interruption insurance won’t get their claims denied because of major events, such as the coronavirus pandemic, public safety power shutoffs, or evacuations.

This bill will allow businesses to have their future insurance claims honored during these kinds of crises and compensate the owners for lost revenue. Business owners will then be able to take care of rent or mortgage obligations, meet overhead costs, and pay their employees. This insurance will be a vital piece of their lifeline through these major events that disrupt our everyday lives. In many cases, it’s the difference between a business staying open and closing permanently.

We have heard from so many local businesses in our districts who are getting denied and are worried about making necessary expenses, during the COVID-19 pandemic. Small businesses employ over 50 percent of the American workforce and they are the backbone of our economy. It is time for the insurance industry to stop moving the goalpost and shirking its duty to act as a responsible stakeholder. The insurance industry does have a role to play going forward and must be a part of the solution—not run away from it.

Though our bills differ in the details, we have come together across party lines with the same goals in mind – saving our small businesses. It is time for all of us to come to the table and work in good faith to protect our communities, just as the many small businesses across our country are doing now. Forced closures should not mean the end of the local businesses that power our economy.

Main Street America is looking for help, and they need it now.

Brian Fitzpatrick represents Pennsylvania’s 1st District and Mike Thompson represents California’s 5th District.