Small businesses trying to get their state legislatures to force insurance companies to cover coronavirus losses are coming up against an opponent many might not have expected: The U.S. Chamber of Commerce.
Businesses large and small often look to the chamber and its local counterparts to be their voice in statehouses and on Capitol Hill. The national organization fosters that expectation, saying on its website it represents “the interests of more than 3 million businesses of all sizes, sectors, and regions.”
But in this battle, it’s the interests of enormous insurers facing billions in liability that are holding sway.
The focus of the dispute is insurance for business interruptions, which after the 2003 SARS epidemic usually exempt viruses. Eight states – with others in the wings – are considering bills to close that loophole and make insurers pay up now.
In a letter to Congress last week, the U.S. Chamber said allowing Congress or states to rewrite contracts to cover coronavirus losses is unconstitutional and would leave the insurance industry in ruins.
“Bankrupting the insurance industry wouldn’t help the situation at all,” said Tom Quaadman, an executive vice president at the Chamber.
Quaadman said the group discussed the situation with a cross section of its members but ultimately determined that “allowing government to rewrite contracts does away with a bedrock certainty of transactions.”
While court battles over coronavirus coverage are likely to stretch out for years, in the near-term, those lobbying dollars flowing to the U.S. Chamber from small businesses are being used against them, said Bob Hunter, a former Texas insurance commissioner and current director of insurance at Consumer Federation of America.
“We’re paying to build our own scaffold for where they’re going to hang us,” Hunter, said.
Fine print means no coronavirus payouts
Thirty million Americans are out of work and recent surveys from the Chamber indicated one in four small businesses face permanent closure due to coronavirus. Another survey from Main Street America, a business nonprofit, suggested that 7.5 million small businesses could close their doors forever.
Yet, as businesses shuttered by government orders reviewed their insurance policies, they discovered the fine print excludes claims for viruses, or bacteria.
That language was created by the Insurance Service Office, a widely used insurance risk analytics firm, which wrote standards in 2006 stating, “We will not pay for loss or damage caused by or resulting from any virus, bacterium or other microorganism…”
Estimates by a leading insurance industry group say paying coronavirus interruption claims would cost $255 and $450 billion per month for businesses with fewer than 100 employees. Other estimates put the tab closer to $100 billion a month.
Insurers are dug in for the fight. Among the loudest voices opposing insurance payments or changes to contracts has been Evan Greenberg, chief executive officer of Chubb, one of the world’s largest insurers.
Chubb is a prominent member of the U.S. Chamber and of its Institute for Legal Reform, a lobbying wing that seeks to crack down on lawsuits against businesses.
“Insurers have finite balance sheets and the loss from a pandemic is infinite,” Greenberg said on CNBC last week. “The only one who can take that on is the government.”
A Chubb spokesman said the company provided discounts to auto and commercial policyholders and extended payment terms. It also said it’s been making pandemic-related loss payments to business customers for workers’ compensation and travel insurance – and paying out business interruption claims to those whose policies included pandemic coverage.
Insurers and their lobbyists started sweating even more last month after President Trump signaled his support for a government mandate of interruption payments.
“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 told reporters. “We can’t let that happen.”
But the U.S. Chamber remains among the most influential lobbying organizations in the country, spending $77 million last year according to data compiled by the Center for Responsive Politics – more than 5,500 other interest organizations.
‘They cut and run’
Many businesses already have filed claims with their insurance companies and been denied. They’re now left to seek help by other means, through appeals, complaints to state regulators or lawsuits.
Anticipating the fight over coverage, Oklahoma attorney Michael Burrage has filed a lawsuit seeking a judgement against 17 insurers for more than 40 casinos owned by Chickasaw and Choctaw tribes in Oklahoma.
Places like the enormous 370,000 square foot WinStar casino on the Texas-Oklahoma border have been shut down since March 16. Tribes had pumped millions into insurance policies they assumed would help cushion the crushing blow of a total shutdown.
“They’ve paid these premiums for all-risk policies for millions and millions of dollars and then when you need to make a claim, [the insurers] cut and run,” said Burrage, who was appointed by President Bill Clinton as the first Native American federal judge. “That’s not fair,”
MORE: Coronavirus goes to court: After lives and livelihoods come the lawsuits
Small businesses also have turned to their state insurance commissioners after being denied claims.
In Wisconsin, state data shows that complaints have been filed by daycares, bars, bakeries, bridal shops, hair salons and fitness centers. In Washington, Insurance Commissioner Mike Kreidler polled all insurers in the state. Just two of the 84 who responded offered pandemic coverage. Yet about 194,000 business policies had paid $437 million in premiums to those insurers.
In California, after fielding a wave of complaints over business interruption claim denials, Commissioner Ricardo Lara issued a notice to insurers that they needed to investigate all claims sent their way.
“I want to be absolutely clear that insurance companies need to fairly investigate all business interruption claims as they would during any disaster,” he wrote. “Policyholders deserve all the services, coverage, and benefits they are due under their policy.”
Lara, however, stopped short of suggesting any new mandates.
States consider mandates for coverage
Across America, legislators are considering bills to mandate limited coverage for business with interruption insurance.
The first was introduced by New Jersey Assemblyman Roy Freiman, a Democrat, who drew backlash from insurers worried about bankrupting their funds. Seven other states followed suit: Louisiana, Massachusetts, Michigan, New York, Ohio, Pennsylvania and South Carolina.
“I understand the concern they didn’t write policies for this incredible peril," Freiman said, "but we must find a balance between insolvency and 100% denials of claims.”
The main pushback he's faced, Freiman said, has been about creating a legal precedent, which he says could be avoided with limited language. He equated the government mandate to President Trump’s order that insurers waive their deductibles for coronavirus testing.
“I’ve heard from restaurants and their association, and groups of dentists getting hammered by this,” he said. “Why aren’t the chambers supporting small businesses that they usually support?”
In Massachusetts, Democratic state Sen. James Eldridge modeled his bill on New Jersey’s. He says the government could be a guarantor of insurance policies at federal or state level, so tax dollars could provide a financial backstop for claims.
Insurers are pushing back in Massachusetts, too, he said, where support is splitting based on the size of establishments. Large franchises, for instance, may be able to provide a safety net for local owners.
“It’s been an interesting commentary on the different types of restaurants,” Eldridge said. “The chains and big ones can weather the storm, but the pizza place doing carryout won’t – and all of those interests intersect.”
“If they go under,” he said, “all of those insurance premiums will go with them.”
Nick Penzenstadler is a reporter on the USA TODAY investigations team, focusing primarily on firearms and consumer financial protection. Contact him at firstname.lastname@example.org or @npenzenstadler, or on Signal at (720) 507-5273.