Lawmakers seek to close coverage gaps in COVID business insurance

A bipartisan bill in the General Assembly would require Pennsylvania insurance companies to cover COVID-19-related business interruptions and property damage for policyholders.

State lawmakers advocating the bill said small businesses have been denied coverage by their insurers because of “ambiguous language” cited in insurance policies that don’t explicitly include pandemic protection.

“Entrepreneurs and small business owners rely on insurance to cover these types of situations,” state Sen. Jim Brewster, D-Allegheny, said on a Thursday press call. “Covering losses from situations beyond the control of businesses is exactly why you buy and pay for insurance. There should be no problems when operations are suspended and claims are filed.”

The legislation would not provide for additional payments to policyholders beyond existing coverage agreements between the business and insurer, according to the bill. The insurance company could use its standard protocol for processing claims before making any payments.

The bill targets businesses with interruption coverage policies that went into effect no later than March 6 and contain a civil authority clause, lawmakers said. This type of clause provides protections for entities from government action made in response to a natural disaster or life-threatening event. That includes Gov. Tom Wolf’s business closure mandates in March, according to the bill.

In an April memo accompanying the bill, sponsor and state Sen. Pam Iovino, D-Washington, told colleagues in the General Assembly that businesses that have been denied claims after paying policy premiums for interruption protection could find themselves with no other recourse than a protracted lawsuit with their insurer.

“Businesses that have consistently paid their business interruption insurance premiums expect their insurance coverage to provide security during a time of need,” Iovino said. “They need to know that a lifeline they planned for is available and within reach, and this bipartisan bill would do just that.”

In its current form, the bill would require the state’s Supreme Court to hear any challenge to the “validity or constitutionality of this act.”

The bill was referred to the Senate Banking and Insurance Committee on April 30, where it is awaiting a hearing.  Sen. Sharif Street, D-Philadelphia, minority chairman of the committee, said he plans to work with his Republican counterparts to convene a hearing with businesses who can testify about their experiences trying to fill interruption insurance claims.