Push to claim Covid-19 business interruption coverage fails in D.C.

The American Property Casualty Insurance Association | May 07, 2020

  • A push to make it easier for D.C. small businesses to claim coronavirus-related damages under business interruption insurance policies is on hold.

  • That’s because most insurance companies have argued that these business interruption provisions only cover natural disasters, not global pandemics.

  • The next big item on the council’s agenda is the consideration of Bowser’s proposed fiscal 2021 budget, set to be delivered by May 12.

A push to make it easier for D.C. small businesses to claim coronavirus-related damages under business interruption insurance policies is on hold, after the insurance industry mounted a fierce local lobbying campaign against the change.

The D.C. Council opted not to move ahead with a proposal on the subject Tuesday after six of its 12 members raised concerns about its legality and the costs it could impose on insurers. Council Chairman Phil Mendelson struck the language from a broader pandemic emergency bill to allow for more debate.

Councilman Charles Allen, D-Ward 6, had hoped the effort would give restaurants, retailers and other companies forced to close more recourse to claim damages under existing insurance policies. He spearheaded this push on the issue after many small businesses have seen their insurers deny such claims — a variety of local restaurants have begun challenging those denials in court.


That’s because most insurance companies have argued that these business interruption provisions only cover natural disasters, not global pandemics, and paying out damages on all these claims could bankrupt the industry.

The American Property Casualty Insurance Association was especially active in lobbying against Allen’s language, estimating that local businesses could claim losses of hundreds of millions of dollars each month. The group ran Facebook ads in local markets arguing that the change would have “serious negative repercussions for all D.C. families,” mirroring the association’s other lobbying efforts across the country.

These numbers dwarf the premiums for all relevant commercial property risks in the key insurance lines for D.C., which are estimated at $16 million a month, We oppose constitutionally flawed legislation that retroactively rewrites insurance contracts and threatens the stability of the sector, to the detriment of all policyholders

- David Sampson, the association’s president and CEO

Those arguments had legs with several council members. Attorney General Karl Racine’s office suggested that the District would be on sound legal footing in making such a change, but other lawmakers were more hesitant to venture into a court battle raging all across the country.

“I am very confident this will be challenged in court, and very confident this will take a long time to resolve,” said Councilwoman Mary Cheh, D-Ward 3, who doubles as a law professor. “It’s not a slam dunk, by any means … and I do not see the insurance companies laying down on this.”

And with a long legal fight potentially on the horizon, Councilman Kenyan McDuffie, D-Ward 5, said he worried that the insurance change would simply give “a false sense of hope and promise to a community of folks who need action and relief now.”

Councilman David Grosso, I-At large, echoed those concerns, noting that the District would become the first city or state around the country to pass such legislation, and a recent effort to do so also stalled in New Jersey. Lawmakers in Louisiana, Massachusetts, New York, Ohio, Pennsylvania and South Carolina have all introduced similar bills, but none have yet succeeded.

“There isn’t any other jurisdiction that has done this, and there’s a reason why they’ve not done this,” Grosso said. “Trying to short-circuit court cases is not the appropriate role for the legislative branch during this time period.”

But Allen argued that passing this insurance change would show leadership — and local businesses that the District is “on their side." And he questioned the wisdom of relying on the insurance industry’s dire predictions about the impact of the policy change, noting that the council worked to alter the legislation to address insurers’ concerns, but still couldn’t secure concrete estimates of the fiscal effect on the industry.

For instance, the legislation as considered Tuesday would apply only to companies with 50 full-time employees or fewer, and gross receipts of no more than $2.5 million. Earlier versions required businesses to have at least 250 employees, with no revenue maximums; the council circulated another version with a 100-employee limit.


No matter the employee cap, the industry raised warnings of a wildly uncertain financial impacts. At the 250-employee cap, APCIA estimated that businesses would be able to claim damages of $300 million to $1.1 billion per month — at 100 employees, that figure ranged from $180 million to $780 million per month. Mendelson said he pushed for the 50-employee limit immediately before the vote to reduce that uncertainty further, but still heard some pushback.

“It feels like the insurance companies framed this conversation,” Allen said, noting that most policies limit maximum payouts for insurers. “A range of $700 million plus-or-minus is not much of a range.”

But his colleagues didn’t find much comfort in those arguments. Allen said he would look to see this provision revived in the future, perhaps at the council’s next meeting in two weeks.

The council did pass some other coronavirus response measures Tuesday, including:

  • A new requirement that landlords set up payment plans for commercial and residential renters struggling to pay bills. Those plans can extend for up to a year after Mayor Muriel Bowser’s public health emergency ends. The bill also stipulates that landlords may use security deposits or any other rent payments tenants have made in advance to satisfy debts accrued as part of the payment plan.

  • A ban on all foreclosures and evictions for the duration of the coronavirus emergency and for another 60 days after it concludes. The council had previously barred evictions for the duration of the emergency, but this latest change will ensure landlords won’t be able to file evictions that take effect once the District reopens and returns to work. Similarly, foreclosures are effectively on hold while court business is severely curtailed, but this measure is designed to give mortgage holders more time to recover once the emergency subsides.

  • A cap on the fees that food delivery apps charge local restaurants. The legislation bars those platforms from charging a commission of more than 15% of a customer’s order, similar to laws passed in San Francisco and Seattle.

The next big item on the council’s agenda is the consideration of Bowser’s proposed fiscal 2021 budget, set to be delivered by May 12.


The Solutions Initiative brings together leading policy organizations from across the political spectrum to put forward comprehensive plans to put America on a stronger, more sustainable fiscal path.


The Solutions Initiative brings together leading policy organizations from across the political spectrum to put forward comprehensive plans to put America on a stronger, more sustainable fiscal path.

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