American Property Casualty Insurance Association
  • Staff Contact: Nicole Mahrt-Ganley     
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  • July 1, 2020
  • Mandating Business Interruption Coverage Could Threaten Golden State’s Recovery
  • SACRAMENTO, CA - David A. Sampson, president and CEO of the American Property Casualty Insurance Association (APCIA) issued the following statement in opposition to legislation, AB 1552, that creates a rebuttable presumption that the COVID-19 virus caused property damage triggering business interruption coverage in commercial liability policies. 

    “APCIA strongly opposes AB 1552, legislation that would retroactively rewrite business interruption insurance contracts to cover losses for which insurers never collected premiums. This legislation is likely unconstitutional. We will aggressively defend against any attempt to undermine contracts, or violate basic due process, government takings, and contracts clauses of the U.S Constitution, as well as the California State Constitution.

    “Commercial property insurance policies that include business interruption coverage generally are not intended to cover disease or pandemic related losses. Policies are stringently regulated by the California Department of Insurance and are required to be approved by the state regulator prior to use in the marketplace. Business interruption insurance covers the financial impact of an interruption to the normal course of business caused by physical damage to a commercial property, such as a fire.


    “Since viruses, like COVID-19, do not cause physical property damage, they are not typically covered under this insurance. In the vast majority of cases, insurers did not price policies to include such coverage, and policyholders did not pay premiums to have this coverage.


    “This pandemic is unprecedented in its scale, reach, and economic impact on everyone. Insurers are paying — and will continue to pay — every covered insurance claim related to the pandemic, just like we have for other major events. For example, approximately 33 percent of all paid insured losses after 9/11 were from covered business interruption claims.


    “Lloyd’s of London estimates that the pandemic will cost the industry $107 billion in covered claims globally, such as event cancellation covered claims. This excludes life insurance. To put these losses in perspective, Hurricane Katrina caused the greatest insured loss in U.S. history — roughly $54 billion in today’s dollars. All losses from the 9/11 attacks were roughly $48 billion.


    “Mandating retroactive business interruption coverage to include COVID-19 losses that were never intended to be covered by the insurance contract would undermine the ability of insurers to meet their promises and pay claims on all existing insurance policies. This could cause more harm to California’s economic recovery.


    “APCIA estimates that closure losses at the peak of the COVID crisis for California small businesses with fewer than 500 employees (though no such limit exists in AB 1552) could range from $10 billion to $40 billion per month. These numbers dwarf the premiums collected for all relevant commercial property risks in the key insurance lines for California, which are estimated at $480 million a month.


    “Insurers understand the urgency of helping businesses and individuals recover from this unprecedented crisis and mitigate a larger shut down of the economy. Many insurers are implementing flexible payment solutions for families, individuals, and businesses; suspending premium billing for small businesses such as restaurants and bars; and pausing cancellation of coverage for motorists due to non-payment and policy expiration. This includes more than $14 billion in policyholder relief for motorists alone.


    “Our industry stands ready to work with California policymakers. But we oppose this constitutionally flawed legislation that retroactively rewrites insurance contracts and threatens the stability of the sector, to the detriment of all policyholders.”




  • The American Property Casualty Insurance Association (APCIA) is the primary national trade association for home, auto, and business insurers. APCIA promotes and protects the viability of private competition for the benefit of consumers and insurers, with a legacy dating back 150 years. APCIA members represent all sizes, structures, and regions—protecting families, communities, and businesses in the U.S. and across the globe.
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