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COVID-19 LEGISLATIVE UPDATES – BUSINESS CONTINUITY Taken from The Council daily briefings

Tuesday, April 28, 2020

• Liability relief – or lack thereof – has been much the conversation and theme of the day. The chess games

between Senate Majority Leader McConnell and House Speaker Pelosi continued today, starting with

McConnell’s offer last night to dangle the prospect of hundreds of billions of dollars in state and

municipality funding, but only if coupled with a “liability shield.” (McConnell had been for the past week

unalterably opposed to “blue state bailouts” and suggesting that cities and states look to bankruptcy before

they come calling for no-strings-attached federal relief funding.)

• We were right about the logical progression of the DC debates – yet more calls for funding infusion into

the Paycheck Protection Program (PPP), coupled with a package of Democratic priorities, mostly for the

states.

• Early this morning, we got a cheat sheet from a wired Democratic operative and friend detailing all the

kinds of things that Pelosi’s House is expected to pass in CARES 2/Phase 4 (for clarity’s sake, we’re

going to start calling it CARES 2 henceforth): a big list of expected Democratic priorities – with a notable

“no way in hell” (at least that’s our translation) on the House buying in to anything McConnell wants that

would stick it to the trial lawyers. No surprise there. But within a couple hours, Majority Leader Steny

Hoyer put out a specific tweet that said the caucus has yet to have the opportunity to consider liability

reforms. (Also, not a surprise – he is a moderate and wants to be business-friendly.) And then, within two

hours of that, Pelosi announced that the House (unlike the Senate) will NOT be coming back into

session next week, and likely not until they are ready to pass the next round of recovery/stimulus. Again,

all chess-moves (which would be great theater for political junkies like us if not for the real-world

consequences).

Best educated guess here? There will be a big CARES 2 package, but the liability reforms – which

have to be preemptive of state law – will be limited again, to front-line and critical infrastructure facilities.

From there, it will be a battle among states, with a huge divide between red and blue states, as to which

will address indemnity most aggressively.

That may be aspirational under the assumption that in a crisis of this dimension, political considerations

will bow to necessity of action.

• POLITICAL SIDEBAR for a moment. We have been on lots of Zoom calls with Members across the

spectrum in the last week. For years, we have bemoaned the reality that dysfunction has prevailed as a

result of Members of Congress not getting to know one another, over the congressional calendar and the

reality that few Members ever move to Washington with their families. It is worse in this pandemic when

they are going beyond social distancing – they are literally thousands of miles away from one another.

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From the left side of the Democratic Caucus, we hear contempt for businesses benefitting from relief

that might not be fully deserving, and anguish over disenfranchised communities. From the right side of

the Republican Caucus, we hear concern for businesses, but increasingly an unwillingness to print any

more money – perhaps for much of anything.

It is enough to remind us (forgive if you have heard before) of the late great Congressman Mo Udall of

Arizona, who was running for Democratic Caucus chair in the early 1970s. He went to all of his colleagues

and they pledged full support, but on secret ballot he lost by one vote. His quote to the press: “Today I

learned the difference between a caucus and a cactus. With a cactus, the pricks are on the outside.”

Monday, April 27, 2020

• The Paycheck Protection Program (PPP) remains wildly popular and wildly under siege, with the second

troubled rollout of $310 billion in funds being unleashed (or not, depending on your perspective) today.

Note in the link concerns continuing to remain about “whether the bailout funds will be cornered by

industry insiders and large businesses that already have access to cash.” At least 140 publicly held

companies received funds from the first round of PPP loans, including large restaurant chains, a Fortune

500 auto retailer and a pharmaceutical company with $14 million in cash.

Even with demand far outstripping supply of PPP dollars (see this good piece on Bank of America’s CEO

Brian Moynihan’s comments yesterday) we had been blithely reporting here for a couple of weeks that

because the program is so popular, and because it was set up as an entitlement program, Congress would

surely, find a way to continue to fund it. Now, we are not so sure. Your association’s lobbyists have been

hearing a strong rhetoric of rage from Democratic Members of Congress about the PPP dollars failing

to reach the most deserving. And just as clearly, we have been hearing GOP rhetoric of alarm over the

trillions of dollars being printed. To wit, we got a press release today from the conservative Republican

Study Committee in the House. The top priority for the future for the RSC is to “flatten the curve.” But

the curve they are talking about is not the disease curve, it is the “debt curve.”

• As dysfunctional as the last couple of months in Congress have been, it sure feels as if things could get

even rougher. Clearly, the Democratic priority of the moment is a massive infusion of dollars to shore

up state and local governments. Speaker Pelosi reacted sharply yesterday on the issue of the interim PPP

funding versus state and local. Meanwhile, Majority Leader McConnell announcing today that the Senate

will in fact come back to town next week, bashed the effort for a massive new spending bill, saying “we

cannot get distracted by pre-existing partisan wish-lists.”

McConnell reportedly said he is open to providing reeling states and cities with relief, but at a price.

“We’re not writing a check to send down to states to allow them to, in effect, finance mistakes they’ve

made unrelated to the coronavirus,” McConnell said. McConnell wants to limit the liabilities of healthcare

workers, business owners and employees from lawsuits as they reopen in the coming weeks and months.

“The next pandemic coming will be the lawsuit pandemic in the wake of this one. So, we need to

prevent that now when we have the opportunity to do it,” McConnell said.

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• We are old enough to remember the famous New York Post headline from 1975: “FORD TO CITY: DROP

DEAD.” We may be headed there again in a much bigger way. Or, perhaps just as likely, they somehow

see their way through to a state/local/PPP compromise and print another trillion or two…This is for sure:

CARES 2 is going to be a political Lollapalooza. Better would be for Congress to compromise and come

up with a broader federal facility without all the holes of CARES.

Friday 24, 2020

• First is this editorial in today’s Wall Street Journal which has the most to-the-point lede ever: “Millions

of Americans will lose their jobs and tens of thousands will die from COVID-19. Leave it to the

plaintiff bar to make money off the misery.” And this link leads you to an excellent six-page white paper

out today from the American Tort Reform Association (ATRA) citing concerns, explanations, and

solutions to the litigation crisis that has already begun. ATRA has been performing wonderful works for

decades now, in the states and on Capitol Hill. In our view, they are right on policy prescriptions, but

liability relief is likely to be significantly limited given the Democratic House’s strong fealty to trial

lawyers. That is not necessarily the case in the states, and we thank New York Governor Andrew Cuomo

and others for providing much needed liability waivers for frontline healthcare workers, for example.

ATRA rightly raises the top concern of lawyers attempting to circumvent the workers compensation

system and bring tort lawsuits against employers for exposure to coronavirus at work. We know with

certainty this is already happening and will proliferate, and ATRA proposes this solution: “Legislation

may provide that an employee can only file a claim outside the workers compensation system when an

employer intended to injure an employee. A plaintiff would need to show clear and convincing evidence

of a specific intent to harm an employee to proceed in the tort system. This approach may not be needed

in jurisdictions in which courts consistently apply a similar high standard for work-related tort claims,

restricting lawsuits to injuries that stem from truly intentional acts.”

• This was issued this afternoon by the Society of Independent Gasoline Marketers Association,

demanding liability relief for businesses that are DHS-designated critical infrastructure. We expect to see

a lot more of this.

• There is unquestionably a major divide about the need for a massive “Phase 4” solution. Senate

Majority Leader Mitch McConnell has made it abundantly clear that he does not want to go there, while

Democratic leaders are increasingly insistent for state and local government subsidies. McConnell calls

those “blue state bailouts” and has suggested that states and localities pursue bankruptcy instead.

• On one Zoom call today with one of our favorite mainstream Republican members of the House Financial

Services Committee, we were alarmed to hear the lobbyist for one of the nation’s largest banks saying

their economists have modeled demand for PPP loans at $1 trillion, give or take a hundred billion

(we never thought we’d write those words in a sentence). Our math, then, shows a potential $441 billion

shortfall in the program that was established essentially as an entitlement. On another Zoom call with

House Democratic leadership, the dismay with how PPP dollars were distributed was so significant that

there was skepticism as to whether the program would ever be funded again. We are already seeing

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that Republicans like the PPP more on balance than the Democrats do, so this may be a train wreck. Fingers

crossed that Henry Kissinger’s old line that “90% of the politicians give the other 10% a bad name” does

not wind up applying here.

• Meanwhile, the Small Business Association yesterday issued clear guidance concerning the Paycheck

Protection Program, mandating borrowers must need the money or else they should pay it back. The

guidance is clearly an attempt to ensure PPP loans go to small businesses hurt by COVID-19, not

fiscally sound companies with borrowing options. As one of our executives wrote us this morning: “I

think a lot of folks in our industry thought about or took these loans. But, with this apparently retroactive

change, I fear that some that obtained money might need to give it back under the safe harbor provision

before the SBA comes knocking looking to confirm that the business had no other access to capital.”

Thursday, April 23, 2020

• Rep. Brian Fitzpatrick (R-PA) testified this afternoon at a very broad Small Business Committee hearing

about what next steps should be taken for the economy, and he was the only one to mention insurance,

and not in a good way.

Here is what he said:

"We have two choices going forward. God forbid we're down this path. We either choose the

path of government bailouts or we create an insurance product. Right after 9/11, we created the

TRIA program, which made all the sense in the world. It was market priced; it was risk based,

and it was federally backstopped. There are a lot of industry tradespeople out there who are

trying to say that this is not their problem, they don't want to be a part of this solution. They have

to be a part of the solution. We can create a product where they can make money that insures

our small businesses. Because Madame Chairwoman, there are now small banks in our

community that are now telling small businesses that they will not extend lines of credit and

financing unless they show some level of insurance. That has got to be the solution going forward.

These bailouts are inefficient, they miss the target, they result in endless deficits, endless printing

of money, and they miss the mark as PPP has. We can fix it. Let's work together with the Treasury

Department to make sure these guardrails are set up, so we protect our mom and pop small

businesses and not give these loans out to people that don't need them."

There are some very decent thoughts in there – we especially disdain how the CARES Act has had the

effect of arbitrarily picking winners and losers. But we know that Congressman Fitzpatrick considers

CIAB to be among his disparaged “industry tradespeople.” Pardon us, Congressman. Our Board of

Directors has leaned in strongly on a prospective pandemic response that relies upon the machinations of

the existing (property and BI) insurance industry. Here again are the principles our Board approved

unanimously last week. Do we fundamentally agree with insurers that pandemics cannot be underwritten?

Because, as Evan Greenberg says in this Politico piece, "Unlike a hurricane or an earthquake, a pandemic

is not limited by geography or time. It is everywhere geographically and for extended periods of time. So,

the loss potential in practical terms is almost infinite." Sure, we do. But that does not mean that a

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federally backstopped insurance facility cannot be created as at least a major part of the solution for

clients looking beyond the current crisis.

• Speaking of winners and losers, we noted that the Administration to date is not releasing the names of

companies receiving forgivable loans and other government money. As Obama’s former chair of the

Council of Economic Advisors Austan Goolsbee said today: “Nobody ever suppresses good news. Okay,

if the list was great … they would have released it yesterday. You know perfectly well the reason they are

not releasing the list, which is people will start holding them accountable for who is getting the money …

It’s kind of the flashbacks of 2008-09 that it’s going to matter for the credibility of this program and

whether we the American people think it is working and want to keep engaging in it.”

• By the time you read this, the House will have overwhelmingly approved the $484 billion “Paycheck

Protection Act and Health Care Enhancement Act” (otherwise known as “CARES 2.0”) with the $325

billion infusion into the PPP. Their first vote of the day, to establish an

oversight subcommittee (to provide years of recriminations on the

handling of the crisis) passed on a vote of 212-182 along party lines. It is

been interesting to watch the social distancing measures wherein a “15-

minute vote” now requires 90 minutes. See Nancy Pelosi on your left. A

vote-by-proxy system is still evolving.

• We have been seeing much traffic on the issue of trade credit insurance governmental backstops in order

to mitigate the tatters of the worldwide supply chain. France and Germany have been at the tip of the

spear of this issue, and their efforts to be the reinsurer of such transactions appears to have growing appeal.

Here is a very good story on the issue from the Financial Times. Please note, if you are not a Financial Times

subscriber, you may have to fill out a registration to see the story for free, but that only takes a minute or two.

CIAB Board member Jochen Koerner (CEO of Ecclesia Holding in Cologne) deserves some of the

credit in advancing this issue in Berlin, where the government has given assurances of a multi-billion-euro

backstop. In texting with him about it, we asked about other challenges in Germany where, honestly, things

seem to be going much better economically. Here was the interesting tidbit from his text to us: “Berlin

now says that a company gets less bailout money of any kind if they are covered, i.e., insurance first.

Problems: 1) insurers don't want to pay; 2) the (policy) wordings say, "subsidy first;" and 3) long term:

Why should you buy insurance? Carriers don't pay and Merkel will bail you out anyway.”

Wednesday, April 22, 2020

• We have got a bunch of great tidbits below on the benefits front. Our “insider” stuff takes us to a virtual

meeting attended today by our top Democratic lobbyist Joel Kopperud with top Democratic House

staffers, looking ahead to “Phase 4” negotiations on yet another stimulus/recovery bill. (Joel was

participating as part of our “Fight for Healthcare” coalition, which is an extension of the group that knocked

out the ACA’s Cadillac Tax last year.) We’re not at liberty to give all the details based on confidentiality

of the call, but clearly “Phase 4” will be benefits-centric, but we’re pleased to report that there was

strong sentiment that the future of economic recovery and health insurance continuity hinges on

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maintaining the role of the employer in providing coverage for the employees. Expect to see a lot more

in COBRA subsidies, among many other provisions.

Joel closed his email with this line: “We can look to the Pelosi Cares 3 bill as the House starting point for

Cares 4.” To which our thoroughly Republican lobbyist Blaire Bartlett responded: “Of course we can

look to that bill because absolutely everything under the sun is included in that bill.”

• Unsaid, of course, is the emerging GOP line that we need to digest the near-$3 trillion in spending and

debt for several weeks before we even consider another trillion-dollar package. See: Senate Majority

Leader Mitch McConnell full article here.

• APCIA President and CEO David Sampson appeared yesterday on CNBC’s “Closing Bell” stating the

property/casualty insurance industry is supportive of federal public policy solutions to assist small

businesses struggling due to the coronavirus. Sampson noted that business interruption coverage excludes

virus-and bacteria-related events, and "there is no way that an insurer, even global reinsurers, can diversify

their risk in the midst of a pandemic.”

Tuesday, April 21, 2020

• The Senate passed a $484 billion interim coronavirus funding bill via voice vote late Tuesday afternoon

with the House set for passage later this week. The most important thing about the latest stimulus/

recovery bill is the $322 billion of the agreement is for replenishing the Paycheck Protection Program

(PPP), which dried up last week, and roughly $60 billion of that total will be allocated to small lenders

and community banks. What is breathtaking to us is news from banking industry colleagues that the

burn rate is $50 billion a day.

Another $75 billion is coming for hospitals and $25 billion for expanded testing, with the possibility of a

bill reaching President Trump's desk before the weekend.

One of the biggest issues that the PPP faced in the rollout of the program was that small businesses in

underserved communities struggled to compete with bigger businesses that had existing relationships with

banks. This bill has carve-outs so that community businesses and lenders do not have to fight bigger

businesses and banks for the same funding, a provision that Democrats fought hard for.

The House is beginning to return to Washington for a vote as early as Thursday. President Trump urged

Congress to pass the bill in a tweet, signaling that he is ready for the legislative branch to move on to a

fourth stimulus package.

Read the bill here

• For weeks now, we have been angling for our position in the “Phase 4” negotiations – creation of a

federal facility for broader business continuity. Recognizing that there are only so many trillions of dollars

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to be printed, it is not yet clear that deep bipartisan support can be found within the Administration and on

the Hill. But keep an eye out tomorrow for another effort that we are making with fellow major

organizations in the benefits space about the necessity for Congress – in the next round of negotiations –

to shore up the employer-sponsored group health insurance marketplace.

Monday, April 20, 2020

• We are glad we took a weekend hiatus from reporting to you, as we would have followed the pack mentality

that a deal to reinfuse the Paycheck Protection Program (PPP) was imminent. Congressional leaders and

the Administration remained divided (and acrimonious) throughout the day. Meanwhile, the proposal has

swelled from $250 billion to $300 billion. A major impasse is the demand for more relief for states and

municipalities that is opposed by the White House and congressional Republicans. And while Speaker

Pelosi and Minority Leader Schumer support the infusion for the PPP, they continue to insist that much of

it be targeted to Community Development Financial Institutions. And the Democrats want more money

for testing. One lobbying colleague today said both sides are still “struggling with the dynamic of trying

to make changes to operating programs – like repairing the transmission on a moving car.”

Meanwhile, Politico’s Anna Palmer this morning said that like Seinfeld, this debate has been about nothing.

“Why? Because Democrats and Republicans mostly agreed about all the items that they were fighting for.

At some point, Congress is going to have to send hundreds of billions of dollars to states and local

governments. So, the Republicans’ protest here will be short-lived. President Trump on Sunday night even

conceded he is in favor of sending state and local [municipalities] cash. Democrats held out and got modest

wins – items Republicans mostly agreed with. This was a debate about the immediate order of operations,

not long-term priorities. State and local out, hospitals in -- who cares? It is all going to happen at some

point anyway.”

• One timely SBA loan issue: Our friends at Hylant raised a question about the challenges associated with

forgiving projected health plan expenditures through the Small Business Administration (SBA) Paycheck

Protection Loan (PPL) program for smaller businesses with self-insured plans. Because smaller employers

do not typically earmark funds to be used to pay future plan expenditures—and instead pay claims as they

come—we plan to submit this letter to the SBA tomorrow morning asking for clarification on how loan

forgiveness would work in those cases.

• Continuing a growing list of policyholder lawsuits against insurers, a group of law firms together filed six

class-action lawsuits against insurers in federal courts from California to New York on Friday on behalf

of commercial policyholders seeking business interruption coverage for coronavirus-related losses. These

latest filings continue to address common themes including assertions that the presence of the coronavirus

in or around a property constitutes physical damage under the terms of the policies and coverage is also

triggered by the civil authority clauses in business interruption policies.

In the latest batch of federal lawsuits seeking class-action status, policyholders represented by four law

firms in Chicago, Houston, and Madison (WI), represent a variety of businesses including restaurants, a

bakery, a bridal wear company and a dentist, in a variety of states. All the law firms are listed as co-counsel

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on each of the suits. The suits make similar allegations and hold that none of the policies have “any

exclusion for losses caused by viruses or communicable diseases.”

Also, on Friday, a group of Pennsylvania personal injury lawyers filed two lawsuits seeking class-action

status against Erie Insurance Group in state court in Pittsburgh. The two suits, Joseph Tambellini Inc. v.

Erie Insurance Exchange and HTR Restaurants Inc. d/b/a Siebs Pub v. Erie Insurance Exchange, assert

that the all risks policies issued do not exclude coronavirus-related losses.

• Meanwhile, the Pennsylvania Supreme Court invoked its Kings Bench jurisdiction last week to decide,

and ultimately deny, an emergency application for extraordinary relief challenging Governor Tom Wolf’s

executive order compelling closure of the physical operations of all non-life-sustaining businesses in

response to the COVID-19 pandemic.

• The Council is archiving all relevant business interruption-related lawsuits in the Property/Casualty section

of its Resource Center.

Friday, April 17, 2020

• Speaking of the trial lawyers who are already filing lawsuits against businesses providing products or

services in the wake of the coronavirus pandemic: It will be months, if not years before these lawsuits go

to trial, and much will be forgotten in that time. Governors across the country have issued executive orders

offering limited liability protections in an effort to protect certain frontline workers, like those in

manufacturing and healthcare. A new white paper issued by the American Tort Reform Association

(ATRA) explains why legislative action is needed to protect critical workers from liability in the long run.

And speaking of ATRA, we ran this as a small item at the bottom of our newsletter last week, but it’s worth

a quick scan. The report reveals that more than 90% of class action members in consumer fraud cases

receive no benefit whatsoever from this type of litigation.

• Washington Insurance Commissioner Mike Kreidler polled insurance carriers in Washington State and

found that most business interruption insurance policies offered in the state exclude pandemic and virus

coverage. Kreidler issued a press release today noting that two insurers in the state offer coverage for

pandemics through their base policies, and an additional 15 offer limited coverage through endorsements

to standard policies. But “the vast majority specifically exclude coverage for economic loss due to a viral

pandemic.”

A number of states have issued guidance regarding business interruption insurance – general information

describing what risks are covered and what are (generally) excluded. And, as we noted here a couple weeks

ago, the NAIC and NCOIL have both chimed in, with the NAIC noting that BI “policies were generally

not designed or priced to provide coverage against communicable diseases.”

Kreidler’s statement is notable, however, because it is more than guidance. His department has done its

work – reviewing 226 sample notices to policyholders from 84 insurance companies and insurance groups

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doing business in the state. And moreover, the Commissioner himself has a strong reputation as a consumer

advocate and sometime-industry critic, making his findings all the more compelling and interesting.

• For a comprehensive review of state activity, our legal team at Steptoe & Johnson has updated the

following documents:

State Insurance Regulatory COVID-19 Update

State Regulatory Responses to COVID-19

State Insurance Premium Forbearance Requirements

Thursday, April 16,2020

• In other news, the Paycheck Protection Program (PPP) is already out of money, and Congress is

deadlocked over how to top it up, with Democrats continuing to oppose Republican efforts to infuse an

additional $250 billion as they demand equal funding for hospitals and local government – and want half

of the earmarked additional PPP funds to be directed to “underbanked” small businesses.

Here is Leader McConnell’s Senate floor speech today, and here is the most recent statement of House

Speaker Pelosi.

Like the CARES Act itself, which broke down into acrimony for more than a week after seemingly being

created, we expect there will be a resolution to infuse the program. But darned if we know how

congressional leaders get there.

• One good sign is this statement this afternoon from House Rules Committee Chairman Jim

McGovern, outlining a temporary, “low-tech” remote proxy-voting for the House of Representatives,

which offers some semblance of congressional normalcy and continuity. We have been friends with

Congressman McGovern since he was a Hill staffer in the early 1990s working for then-Chairman Joe

Moakley. When you are the chairman of the Rules Committee, you are an arm of the leadership, and so

you have to jab some partisan elbows from time to time. But Jim is an old-school, thoughtful leader who

remembers the days of Tip O’Neill and Ronald Reagan brawling during the day, sharing beers at night.

Plus, it is just crazy to contemplate in these dark days 435 Members of Congress (plus a hundred staffers)

swarming around on the House floor. Hopefully, the Senate can find a similar way forward.

• Another piece of good news: As you may recall, many states have issued notices requiring or mandating

the granting of premium payment grace periods to policyholders. We have been reaching out to state

insurance regulators to ask them to clarify that agents and brokers are not on the hook if a policy is

cancelled after the grace period with the premiums for the grace period left unpaid. This afternoon,

Commissioner Lori Wing-Heier of Alaska issued this order making just that point. The Commissioner

writes “[w]here carriers do not collect premium payments directly, carriers nonetheless bear the credit risk

if policyholders do not satisfy their payment commitments under applicable agency bill or premium finance

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agreements after the grace period ends…” We are very grateful Commissioner Wing-Heier has issued

this clarification and hope other states will follow her lead.

• The Council’s Board of Directors, chaired by Cottingham & Butler CEO Dave Becker, convened by call

today. Much of the meeting was about the association itself, our financial preparedness, and our shift to a

virtual world of trying to provide value to our member firms during the crisis.

But the Board took a strong “lean-in” position on the issue that is among the most controversial within

the industry today: whether the existing insurance industry platform should be a part of any going-

forward strategy for how the nation will deal with pandemic risks. Certainly, many carriers (justifiably)

have been opposed to the idea based on a pervasive view that pandemic risks are inherently uninsurable,

and concerns about the bandwidth of the industry to handle such claims. For weeks in this space, we have

been reporting anecdotally that we hear great enthusiasm (not unanimous, but strong) among Council

members to be engaged as a part of any going-forward solution. The Board’s action today is reflective

of the desire to be “on the field” as this congressional battle unfolds.

The following are now officially The Council’s guiding principles for a prospective federal pandemic

program:

1. The Council supports establishment of a federal forward-looking risk transfer solution to address

future pandemic scenarios like COVID-19. If or when another global pandemic of this magnitude

occurs, we strongly favor having a program already in place with no new enactment of law

required.

2. Several different models exist or have existed to address risk transfers and consumer protections

in times of widespread losses and massive social and economic disruption, including the

Terrorism Risk Insurance Act (2002), National Flood Insurance Act (1968), Price-Anderson Act

(1957), War Damage Insurance Act (1942), and the War Risk Insurance Act (1914).

3. Any solution put in place to address future pandemics deserves careful study and stakeholder

engagement, and should not be based on an assumption that any one model from the past is

wholesale appropriate for, or transferable to, this very different set of risks and circumstances.

4. The Council is uniquely positioned to help advise on insurance-related aspects of any forward-

looking federal solution and would welcome the opportunity to participate in those discussions

as a policy is formulated.

• Yesterday, we noted with alarm that the only representative of the insurance industry invited to the Trump

Administration’s “Great American Economic Revival” panel is Evan Greenberg of Chubb (meanwhile,

the restaurant industry alone has 19 representatives). Here is a good story that ran today on Greenberg’s

views.

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• Of course, the prospective debate over a federally backed business interruption program is different than

the retrospective debate that continues amid even further trial-lawyer-led PR hits, such as this one. To back

us up, we have been talking to all our allies on both sides of the aisle, and we’re optimistic that any

legislation forcing retrospective BI payments lacks momentum. We are hopeful that members of the House

Financial Services Committee will ask the President and his partners pushing for retrospective BI claims

to stop distracting and start focusing on more viable solutions that can actually help the business

community, right now. We reported yesterday on a letter to the President led by Congressman Steve

Stivers. Here’s the final edition with almost all of the Republican members of the House Financial Services

Committee joining.

• Speaking of trial lawyers, more than 20 conservative groups have signed a letter to Leader McConnell

and Speaker Pelosi asking Congress to take measures to protect companies from “frivolous

coronavirus lawsuits.” The letter, obtained by The Hill, urges Congress to enforce “stronger liability

protections” for industries that are “currently on the frontlines of the nation’s coronavirus response and

relief efforts” to “create shields from trial lawyers’ frivolous, costly, and job-killing litigation schemes.”

“While the rest of America has come together to fight this pandemic, some trial lawyers have instead

plotted to line their pockets with COVID-19 related lawsuits,” the letter states. “Their greed is hurting

America in this time of crisis, and lawmakers must put their exploitation of this public health crisis into

check.”

The letter warns that trial lawyers may seize the opportunity to bring massive claims against hospitals,

nursing homes, manufacturing plants, grocery stores and other industries that are already under immense

financial pressure to stay in business.

• There is a saying in politics: The more you explain, the more you lose. Never truer for us than right

now as we to explain why pandemics are excluded from Business Interruption policies. The Insurance

Information Institute (Triple I) hosted a webinar today on the impact of COVID-19 on the property/casualty

market. The biggest takeaway is that the insurance industry cannot handle what’s happening right

now; no risk model would have prepared the best manager for this – it’s like if Hurricane Katrina

happened five times in one month and then five times again the following month.

Put simply, if insurers were to pay out a BI claim for every small to medium business, regardless if they

had coverage—according to Triple I, only 40% of small to medium sized businesses have BI policies; this

number is considerably less if you’re in the top Fortune 100—the industry would lose roughly $300 billion

in a month, going from approximately $700 billion surplus to about $400 billion in just a matter of weeks.

This dramatic loss in surplus would most likely push credit agencies to downgrade ratings. If insurers

would be required to pay another month, the surplus would go below $200 billion, which would then push

regulators to take over business.

• We should note that one of our members developed a product with a carrier, but because of the super high

premiums (high risk=high premium!), the take up rate was negligible.

• Much like after 9/11, we may see a withdrawal of business interruption coverage.

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Wednesday, April 15, 2020

• Last week, we predicted the Paycheck Protection Program (PPP) in the CARES Act would run out of its

$349 billion in spending authority by Thursday of this week. We were apparently just a tad off. As of

this morning, the SBA reported $289 billion had been allocated, and The Wall Street Journal reported this

afternoon that the money will run out tonight. That is the bad news. The good news is that congressional

leaders and Secretary Mnuchin have been negotiating all day and perhaps they can come to an agreement

on a $250 billion infusion. (Democrats want half of the increase to be earmarked to distressed and

underserved businesses and want hundreds of billions in other spending.)

• Want to see how corroded the relationship between Democratic leaders and Trump is right now?

Just read this letter Nancy Pelosi sent to her Democratic colleagues yesterday. Sheesh.

• Just as we also predicted two weeks ago, there are reports about disparity between potential winners and

losers in the PPP.

• This afternoon, all the key property/casualty insurance trades and the policyholder coalition finally

concluded negotiations on the creation of a COVID-19 Business and Employee Continuation and

Recovery Act, which we hope might form the framework for the next major “phase” of stimulus/recovery

– and avoids the pitfalls and holes of the CARES Act. We’re pleased about this, but it is entirely unclear

whether this approach will be embraced by the Administration and congressional leaders. For starters,

Majority Leader McConnell wants the nation to digest the $2.2 trillion of CARES, plus the $250 billion in

extra dollars, plus the $2.3 trillion liquidity loan play of the Fed last week. Secondly, all the focus seems

to be on the PPP as the principle mechanism for relief to the economy, and we don’t know how much

appetite there will be for an entirely new facility. Still, we will make a valiant effort and we have deeply

respected partners (with tons of political clout) in the policyholder/business community.

• Meanwhile, our disappointment with the President’s embrace of the trial lawyer version of retroactive BI

coverage notwithstanding, Republicans in the House of Representatives have been stepping up in the

industry’s defense. Not one, but two, “Dear Colleague” letters are gathering signatures, one authored

by Representative Steve Stivers of Ohio (he’s the ranking Republican on the Insurance Subcommittee of

the Financial Services Committee), and the other by Representative Ted Budd of North Carolina, who is

viewed as an even more conservative member. Last Friday, we reported how Senator Tim Scott and six

other prominent GOP senators penned a similar letter to the White House. As for our Democratic friends,

for the most part they roll their eyes on the efforts of some liberal members to demagogue the issue, but

crickets to date on actually asserting a defense of the industry on paper.

Tuesday, April 14, 2020

• This week, a California trial lawyer filed five separate suits against Travelers for business interruption

coverage related to the coronavirus pandemic. Similarly, River Twice Restaurant in Philadelphia sued

W.R. Berkley. All suits, much like the ones we have covered in previous newsletters, seek declaratory

rhsb.com/COVID-19 Resources Insurance • Risk Management • Employee Benefits 13

judgments that affirm the business interruption policies held by the plaintiffs cover losses due to

government-ordered closures.

The latest suits are part of a wave of litigation in state and federal courts across the country, including some

seeking class action status, in which policyholders argue that business interruption policies should cover

coronavirus-related losses.

In responding to the anticipated surge of lawsuits stemming from the COVID-19 pandemic, the

American Tort Reform Association released this white paper which explores tort liability concerns

and considers potential solutions. ATRA’s white paper outlines policy prescriptions to address

COVID-19 liability, including legislation:

- Limiting the liability of businesses that design, manufacture, sell, or donate protective equipment,

medical devices, drugs, or other products for use by health care providers and facilities (and

possibly the general public) in response to a declared public health emergency.

- Providing health care providers with greater discretion to make decisions about medical care

without the fear of liability during a pandemic or other health emergency; and,

- Prohibiting lawyers from suing employers on behalf of individuals who did not develop COVID-

19, were asymptomatic, or experienced common flu-like symptoms.

Treasury’s Small Business Administration updated its FAQ on the Paycheck Protection Program (as

of April 14).

Treasury also updated its CARES Act website to include specific sections on:

- Assistance for American Workers and Families

- Assistance for Small Businesses

- Assistance to State and Local Governments

- Preserving Jobs for American Industry

This white paper penned by Wakely’s Broker Consulting Services takes a deep dive into COVID-19

healthcare cost considerations for employers. From the paper: “Insurers will likely be conservative

when setting 2021 premium rates, either in their assumptions or risk margin. Both fully insured and

self-funded employers should expect an increase in premium equivalent costs in 2021, although

estimates vary widely at this point.”

This ALIRT Insurance Research report outlines the financial impact of retroactive business

interruption payments on the U.S. P&C insurance industry.

Monday, April 13, 2020

• Two new assaults were launched from congressional Democrats attempting to force pandemic business

interruption payouts. Not to mention the California Insurance Department announcing mandatory (and

probably unconstitutional) takings from insurers (see more on that below). Also, not to mention this comes

just a couple days after the President of the United States exhorted the industry to pay claims and cast

rhsb.com/COVID-19 Resources Insurance • Risk Management • Employee Benefits 14

doubt on the validity of policy exclusions that have been pervasive in the industry ever since the SARS

outbreak.

Rep. Mike Thompson (D-CA) launched a “Dear Colleague” letter today asking for original cosponsors

for his legislation that is a trifecta of fantasies – it would force insurers to pay existing claims, would force

them into paying them going forward, and, for good measure, would even put coverage requirements of

Business Interruption (BI) policies on steroids – viruses/pandemics, power shut-offs in the area, any civil

authority closures, regardless of cause. Here is our industry response letter to Thompson.

Thompson’s bill retroactively nullifies any exemption (not just virus) in every BI policy and overrides

State DOI approvals of such exemptions. Exemptions can be reinstated if the insured says yes or cannot

pay the increase in premiums that this bill would obviously bring about. We wonder whether Rep.

Thompson consulted with any actuaries to figure out what that price tag would be exactly. As one industry

colleague noted today: “Thomas Keller and his $1,500-a-plate restaurant in Napa might actually be the

only policyholder that could afford this coverage." Thompson’s staff claims to us that the bill is

prospective, not retrospective, and will not negate contractual obligations. But that is not what we read. As

Lincoln said, “calling a tail a leg doesn’t mean a dog’s got five legs.”

Meanwhile, Rep. Primila Jayapal (D-WA) hurled this letter at major commercial insurers demanding

they force themselves into insolvency and seeking all kinds of detailed information about the companies’

policies relating to approving and denying claims. Our favorite part of her missive was this:

“Commercial insurance companies should honor all clearly covered coronavirus-related losses, work

closely with the offices of state Attorneys General to resolve disputes, and set up accessible means by which

policyholders can get answers on their coverage and resolve disputes quickly without having to resort to

time-consuming and expensive litigation.”

• California insurance commissioner Ricardo Lara has ordered insurance companies to return premiums for

at least six lines of business, citing a reduced risk of loss due to shelter in place restrictions. The order

covers partial or full refunds paid by consumers and businesses for at least the months of March and April

and may continue into May. Refunds are also required in “any other insurance line where the risk of loss

has fallen substantially as a result of the COVID-19 pandemic,” Lara’s office said in the statement. Insurers

are required to provide a premium credit, reduction, return of premium no later than August 2020. This

most recent order (announced today), follows Lara’s previous request of at least a 60-day grace period for

insureds to pay their premiums.

Our inboxes blew up on this California issue. What does it mean for commissions? Will it spread to

other opportunistic state commissioners? This will clearly evolve this week, but here was the instant

analysis from The Council’s chief legal officer Scott Sinder to a West Coast executive:

“I don’t see how they can do this, especially mid-year. I am sure the carriers are flipping out.

Will be interesting to see how quickly they are able to launch a coordinated response. Although

one route is to just not do anything and let the department come after them. Then the legal issues

are a defense. My bet is they send something into the department challenging the action and then

maybe file a declaratory judgment lawsuit. That would slow everything down at least.”

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Other states have issued bulletins or advisories encouraging carriers to refund premiums for auto insurance

(including commercial auto) – and providing some regulatory relief to make it easier, but California

appears to be the first that is mandating refunds and including other lines of coverage, as well. The

California notice raises many questions – not the least of which is the legality of the order. We anticipate

much more to come on this.

• A thoughtful Republican member of the House Ways & Means Committee – a guy who gets along well

with folks on both sides of the aisle – rang us up today just to check in and get our thoughts on all of the

insurance-related issues in the crisis. We wanted to know what the endgame is going to be on a “Phase 4”

bill, especially as the Paycheck Protection Program (PPP) will be running out of money in the coming

days, perhaps even this week. Republican leaders want a straight $250 billion infusion of the PPP, and

Democratic leaders want lots of strings attached, plus hundreds of billions of dollars even more for other

programs. “I wish I knew,” he said. “Unfortunately, I think the clamor and anguish of small businesses are

going to force some action when the PPP is depleted, and unfortunately we’re probably going to have to

eat even more spending.”

• Worth your time: Lloyd Dixon, director of the RAND Center for Catastrophic Risk Management and

Compensation, and a senior economist at the nonprofit, nonpartisan RAND Corporation, covered both

sides of the business interruption insurance coverage debate in this blog.

Legal Challenges on Business Interruption

The El Novillo restaurant group in Florida filed suit against several Lloyd’s of London syndicates, joining

other businesses and groups across the U.S. in attempting to force their insurers to pay BI claims stemming

from civil authority closures. “This action seeks a declaratory judgment that affirms that the COVID-19

pandemic and the corresponding response by civil authorities...triggers coverage…and finds that the

underwriter defendants are liable for the losses suffered by the policyholders,” said the filing. The suit also

seeks a declaration that future losses from civil authority closures will also be covered.

The judgment will not only apply to the El Novillo Group, but also to hospitality businesses like bars, hotels,

etc., as long as their policies do not contain exclusions for COVID-19 BI losses.

A Houston dine-in theater company is also suing “certain underwriters” at Lloyd’s after being told its

pandemic insurance doesn't cover COVID-19 because it is “not a named disease.”

Friday, April 10, 2020

• We note with resignation that the Senate has twisted itself into knots over President Trump's aid request,

as Democrats refused to rubber stamp his proposal for $250 billion more to boost small businesses under

the Paycheck Protection Program (PPP) under the CARES Act, demanding modifications along with an

additional $250 billion for health care providers and states. Republicans would not go along.

rhsb.com/COVID-19 Resources Insurance • Risk Management • Employee Benefits 16

The standoff Thursday doesn't end the pursuit of more rescue funds, but it came as the government reported

that 6.6 million more people filed for unemployment benefits last week, increasing worries that the

economy is sliding toward a severe recession. The small business program at issue is off to a rocky rollout,

and regulations governing use of the forgivable loans in the $349 billion PPP are coming out on a rolling

basis.

Like the first three “phases” of COVID response legislation, this standoff will get resolved, because it is

imperative that the PPP be more fully funded. Unquestionably, $349 billion will not be enough.

• Particularly with regard to how to access federal assistance, we encourage all our clients and partners to

utilize the resources of:

The Council, and in particular, the material put together by

The Council’s legal team at Steptoe & Johnson.

Today, chief legal officer Scott Sinder and his colleague Kate Jensen did the second in a series of webinars

for thousands of clients of our member firms about the PPP program. Their depth of knowledge about the

Act is unparalleled, and we hope you find it of value.

Thursday, April 9, 2020

• Here in Washington and the rancor continues. See this statement from Majority Leader Mitch McConnell’s

office about the aborted effort today to pump an extra $250 billion into the Paycheck Protection Plan (PPP)

small-business provisions of the CARES Act. Still, like the CARES Act itself, we predict that the sausage-

making processes of Congress will work their way out in the next week or so (after all, it’s going to take a

while for the feds to dump all the PPP money out the back of the aircraft) and the resolution of this piece

of the puzzle will likely be unanimous – proving Tim’s point, albeit in a typically ugly DC way.

• First, from Axios: “Sentence from a nightmare: 6.6 million Americans filed for unemployment last week,

a decline from the previous week's 6.9 million.” We have to just let that sit out there.

• The other breathtaking economic news of the day came from the Fed, as we detailed in a red alert to you

today. The central bank announced a new $2.3 trillion round of loans that include even more support for

small businesses and consumers — and, for the first time, for states, cities and municipalities, too. We

would like to think that this is going to be a smooth rollout as the Fed pumps the cash into the banking

system, but as the PPP/SBA process has certainly indicated, it will be deeply challenging.

The proposed Business and Employee Continuation and Recovery Act.

We have described this in detail for the past 10 days, so no need to rehash it here. We strongly support it

and are pleased at how the insurance industry got on the same page with policyholder/business groups. But

we have heard crickets today since the Fed’s announcement. Everyone is trying to digest and unpack the

implications of another $2.3 trillion in liquidity dollars being released. In many ways, it bears similarity to

the political effort we launched with the goal of the widest possible liquidity access, given all the holes in

the CARES Act. We will put this in the “to be continued” department, so stay tuned.

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Wednesday, April 8, 2020

• Notwithstanding a messy, chaotic rollout of the Paycheck Protection Plan provisions of the CARES Act,

Senate Majority Leader McConnell and the Trump Administration laid down their poker chips yesterday

on a $250 billion supplement to the fund. Today, Democratic leaders upped the ante, making several

demands that could complicate swift passage of “interim” legislation to replenish the fund – and could

have implications on our ongoing efforts to create a broader “business continuity recovery fund” in an

alliance between leading policyholder groups and all of the p/c insurance trades.

Speaker Pelosi and Senate Minority Leader Schumer want half of the $250 billion in new funding for small

businesses to flow through "community-based" banks that serve women, veteran, and minority-owned

businesses. In addition to that extra funding, they want $150 billion for state and local governments, $100

billion for hospitals, and a 15% hike to the maximum SNAP benefit. Democratic leaders have spoken to

Treasury Secretary Mnuchin about their demands for an "interim" coronavirus relief package, but it is

unclear whether McConnell will acquiesce to any of their requests. "We hope our Republican

colleagues will support this 'Small Business Plus' proposal tomorrow in the Senate," a Schumer

spokesperson said this afternoon.

• This is happening amid growing concerns that the CARES Act is going to be gamed in a way that benefits

many at the expense of many others, and that a broader solution is necessary. Many franchisees are finding

out, for example, that they do not meet the eligibility standards for the under-500 employee threshold.

Many businesses have liquidity crises that are not solved by putting non-working employees back on the

payroll. We at The Council are talking with many of our friends in leadership positions on Capitol

Hill, on both sides of the aisle, and we are hearing a clamor for a broader federal facility to dispense

aid to businesses facing existential threats.

Tuesday, April 7, 2020

• Senate Majority Leader Mitch McConnell announced that he hopes to move (by unanimous consent) a

measure this week to provide $250 billion in additional funding to the Payroll Protection Program in the

CARES Act. This is compelling for Council member firms and their clients on a number of fronts.

This appears to be a chess move, one designed to head off a “Phase 4” competition with the Democratic

House, wherein McConnell might have to concede to a host of Democratic priorities in order to secure

necessary ongoing funding for the PPP (Payroll Protection Program), which has been set up essentially as

an entitlement program to qualifying businesses.

Payroll Protection Program Loans - Frequently Asked Questions

• Treasury Secretary Mnuchin today talked with all the top leaders in both chambers, requesting $250 billion

in additional funding (for the record, we still think that will run short). Speaker Pelosi said that she and

other Democrats want strings attached – assurances that the beneficiaries of the fund include

underrepresented and diverse businesses. This seems to be an eminently reasonable request, but the devil

rhsb.com/COVID-19 Resources Insurance • Risk Management • Employee Benefits 18

will be in the details. We should note that it would be weeks away before the $349 billion was exhausted

due simply to the fact that forgiveness payments at a later date will trigger drawdowns from the Treasury.

So, yes, the fund will be exhausted. But will it be exhausted this week? Certainly not.

• Throughout the day, we’ve been asked by member executives, how does all of this fit into our

insurance/policyholder coalition proposal for a much broader federal facility for business

continuation in the expected “Phase 4” legislation, presumably weeks away (for now, we’ll call the

Mnuchin/McConnell proposal Phase 3b)? The short answer is we don’t know. If the expanded $2.2 trillion

CARES Act is deemed within a few weeks as having provided the necessary recovery to businesses during

the pandemic, we very much doubt that the COVID-19 Business and Employee Continuity and Recovery

Fund will emerge as the center of the next legislation. But if, however, there is an outcry about the disparity

of businesses who win and lose based on the arbitrary size of employee force, we would consider this

ammunition for a broader facility approach.

We are still not quite ready to launch all-out grassroots play for congressional approval of the Recovery

Fund, as we are aligning interests and building support within the policyholder community. But our

informal conversations with key staffers to representatives and senators has been quite encouraging.

The sands will continue to shift, and we will expend our political capital toward the broadest possible

efforts to restore American businesses. We have got bigger and more pressing concerns with the crisis than

political consequences for 2021.

• On the benefits front it is clear that the pandemic is going to translate into a major push to devolve

employer-sponsored coverage and move toward a single-payer system, whether “Medicare for All” or any

variant. According to recent analysis, if unemployment hits 25%, enrollment in employer-sponsored

plans could drop to 128 million while Medicaid enrollment could reach upwards of 94 million. High

unemployment would also increase the number of uninsured to 39 million – 40 million, estimates the

report.

As mentioned in previous newsletters, The Council is partnering with the Alliance to Fight for Health Care,

a broad-based coalition that supports employer-sponsored health coverage. The Alliance today sent a letter

to Congress urging them to provide: support for premium payments; federal subsidies to help pay for

COBRA premiums; new funds or loans for businesses to preserve employee access to health benefits; and

easy access to the individual insurance market.

Monday, April 6, 2020

• Meanwhile, our work in advancing the "COVID-19 Business and Employee Continuation and

Recovery Fund" continues full-bore. We expect that by tomorrow, the very significant group of

policyholder business trade groups and the entirety of the p/c industry trades will come to agreement on

the legislative language of this proposal to create a federal facility to get aid to all impacted businesses. It

is tricky lobbying on this issue, especially as there's a standoff right now between Republican and

Democratic leaders as to the necessity of moving to a "Stage 4" recovery bill when Stage 3 -- the CARES

Act -- has yet to be implemented. But in our conversations with Republican lawmakers and staff, there is

rhsb.com/COVID-19 Resources Insurance • Risk Management • Employee Benefits 19

an acceptance that by the end of April or early May, a Phase 4 bill will be needed. At a minimum,

supplemental appropriations for the Payroll Protection Program (PPP) of CARES -- $349 billion in

forgivable loans to a wide (but not perfect) swath of America -- are expected to be necessary.

Friday, April 3, 2020

• Recognizing that liquidity is our priority, we will start with the rollout of the SBA Paycheck Protection

Plan today. Last night we predicted chaos, and this is the lead item on Axios PM this afternoon: “Websites

crashed, phones jammed and confusion reigned as small businesses rushed at today's kickoff to get their

chunk of the $350 billion Paycheck Protection Program.” Apparently, none of the banks could even access

the portal. This, despite Secretary Mnuchin literally making major liability changes at 11:00 p.m. last night

before the midnight implementation, in order to assuage major banks which appeared to be on the brink of

unwillingness to offer the product.

The Council’s Chief Legal Officer, Scott Sinder of Steptoe & Johnson, gently offered a rebuttal to our

assertion yesterday that the $349 billion is going to run out in a heartbeat, necessitating congressional

action. Correctly, he agrees that those dollars will be exhausted, but the Treasury has the ability to keep it

going. The money is going out the door as a loan from a private bank. It will be later, and over a sustained

period of time, that the loans will be forgiven, and banks draw from the federal fund. They could well keep

the spigot open and then go to Congress for a back-end appropriation to true-up the program. So perhaps

a crisis will be averted.

Groups are already decrying how the program was designed and warning that nearly all the money set

aside by Congress to fund the effort will not be enough. "The short-term relief made available through the

Paycheck Protection Program in the CARES Act will be insufficient to ensure independent restaurants can

stay open and continue to employ over 11 million workers," the Independent Restaurant Coalition (a

new trade group formed in response to the coronavirus ravaging the industry) said in a statement. The

American Gaming Association, meanwhile, is pushing back against the rules governing the program,

which will prevent small casinos from applying for the loans, according to the trade group. The SBA "relied

on antiquated, discriminatory regulations that ignore today's economic reality and the congressional intent

behind the bill,” said their president.

• Likewise, we have been hearing a lot from brokerage execs about the non-small business loan facility.

Democrats insisted on a provision that any recipient of such loans be muted during the life of the loan (and

two years thereafter) from opposing any efforts at unionization. This is going to cause a lot of hurting

businesses to look very long and hard before they turn to the government’s loan facility.

• Meanwhile, more support is coming in to our newly named “Recovery Fund Coalition” that represents the

policyholder/insurance trade associations in support of the Business and Employee Continuity Recovery

Fund, which we will be aggressively pushing to be at the center of a Phase 4 bill. You will be hearing a lot

more about this. (In a welcome move today, Speaker Pelosi scaled back her position that Phase 4 should

be infrastructure-based.) Once our congressional champions are identified and mobilized, this will be the

most aggressive grassroots political effort that The Council has ever embarked on. All the millions

rhsb.com/COVID-19 Resources Insurance • Risk Management • Employee Benefits 20

we have spent engaging with members of Congress, supporting their campaigns through CouncilPAC,

using a sizeable portion of your membership dues to lobby aggressively, it may all soon come to a head,

and we will need your support. Strap your seat belt on.

Thursday, April 2, 2020

• We’re writing this up as we watch Jovita Carranza, the head of the Small Business Administration, standing

in the press room of the White House with the President standing behind her, touting the benefits of the

Paycheck Protection Program, hoping we’re wrong in our prediction that this is going to be a chaotic

rollout tomorrow of the $349 billion program. We will eat our words tomorrow night if not. (See this

helpful download from The Council’s legal team at Steptoe & Johnson, and watch the webinar about this

from earlier this week.)

• There is no doubt that the PPP’s application is vastly simpler than any other SBA loan, and generous in

benefits (up to $10 million in 100% forgivable loans), and the money is going to eventually get out the

door to desperately deserving businesses. But the feedback we have gotten from client-facing

commercial insurance brokerages during the last week tells us that even if the rollout is smooth, the

money’s going to go fast. This, we believe, is going to necessitate a Phase 4 recovery bill – and probably

much faster than Republicans (in particular Senate Republicans) want to move. It is in this environment

that The Council continues work to advance the Business and Employee Continuity Recovery Fund,

alongside industry colleagues and a broad swath of the trade associations representing policyholders.

Last night in this space we bemoaned the feeding frenzy of DC interests wanting their piece of Phase 4.

There are lots of good ideas for good things to spend trillions of dollars on, but to the brokerage

community, there is no more important task than the lifeline to existing businesses. Hopefully by the

time Phase 4 is negotiated, this simple fact will sink in.

• The circling trial lawyers had a good day yesterday when they persuaded 32 members of the California

U.S. House delegation (30 Democrats, 2 Republicans) to sign a letter to Insurance Commissioner Ricardo

Lara calling on him to force insurers to cover business interruption notwithstanding policy exclusions.

Here is the response letter that the insurance trades (including The Council) sent to these Members this

evening. As the letter points out: “It is worth noting that recent estimates show that business continuity

losses just for small businesses of 100 employees or fewer could amount to between $220 billion to $383

billion per month. Meanwhile, the total surplus for all the U.S. home, auto, and business insurers combined

to pay all future losses is only $800 billion.”

Wednesday, April 1, 2020

• Today, we took a big step at unpacking and digesting the most-discussed part of the CARES Act: the

Paycheck Protection Loan provisions for SBA loans/grants for firms of under 500. The Council’s legal

counsels Scott Sinder and Kate Jensen hosted a deep-dive webinar today for upwards of a thousand of our

members.

rhsb.com/COVID-19 Resources Insurance • Risk Management • Employee Benefits 21

• But at 30,000 feet, the estimation of everyone we know in Washington is that the $349 billion SBA program

is going to be exhausted in short order, so … what next?

As much as we supported the enactment of CARES, and as much as we hope that it will succeed, the

legislation picks winners and losers and will not be sufficient to restore the economy. Our response has

been an intensive, weeks-long effort to establish the Business and Employee Continuity and Recovery

Fund. Yesterday, this letter was sent to Administration and congressional leaders from a united insurance

community as well as many of the major policyholder associations representing many millions of

American businesses, and today we’ve seen additional organizations rallying behind this approach. We are

socializing the plan with potential congressional champions, and we are hopeful that the approach of a

federal facility to process business continuation could sit at the center of a Phase 4 recovery bill.

But we have competition. LOTS of it. In no particular order, here is just some of what is out there:

The President last night called for the next phase to include a “BIG AND BOLD” $2 trillion in

infrastructure spending. Mind you, everyone knows we need investment there, and infrastructure

spending comes with a beautiful bonus of surety and other insurance spending. But as businesses

shutter by the thousands, does this take priority?

Speaker Pelosi and other Democrats have spit-balled all kinds of other Democratic priorities in a Phase

4 – forgiveness of student loan debt, elimination of the scale-back of state and local tax (SALT)

deductions (which, by the way, would mostly benefit high-income taxpayers), building more passenger

rail, broadband expansion, and tens of billions of dollars in clean water initiatives. Senate Majority

Leader Mitch McConnell responded quickly: "I'm not going to allow this to be an opportunity for the

Democrats to achieve unrelated policy items they wouldn't otherwise be able to pass."

Health providers are unquestionably going need massive rounds of relief.

The list goes on, and every interest group in Washington (55,000 registered lobbyists, for starters) is going

to have hat in hand, many deservedly. But with the exception of our healthcare workers on the front

lines performing heroically, relief needs to be given broadly to the nation’s businesses that did

everything right and nothing wrong. Our policyholder/insurance coalition approach will hopefully get

traction, but that traction might tragically come only when many more businesses falter.

• There is and will continue to be great reluctance on the part of many Members of Congress to come back

to DC. But as the Phase 2 and Phase 3 efforts showed, there is great power and benefit to being in town in

terms of framing a narrative and “holding the pen.”

Tuesday, March 31, 2020 (afternoon)

• The next phase of our efforts will be to identify a bipartisan lineup of champions for this legislation on

Capitol Hill. We are already sensing great interest from many of the legislators with whom we have built

strong relationships over the years. As we consult with our allies on identifying congressional authors, we

encourage you to share these documents with your clients. Already, we know of a couple of firms that

are circulating the letter to clients in industry sectors that are not currently represented among the cosigners,

rhsb.com/COVID-19 Resources Insurance • Risk Management • Employee Benefits 22

and encourage them to get their trade associations to support this approach, which is modeled after the 9-

11 Victims Compensation Fund.

• So, what are its chances? It is far too difficult to assess at this point, and there will need to be a

groundswell from the business community. Perhaps in the end this is not the approach, but right now it is

the best one that we see.

Challenges – we have got a few:

Majority Leader McConnell says we need to first assess any effectiveness of the $2.2 trillion

CARES Act. Speaker Pelosi says we need to move to Phase 4 right away. Currently, both

chambers are recessed until April 20. We want action as soon as possible.

As much as we agree with the Speaker on that, we (and Sen. McConnell) are not liking the

kinds of policy prescriptions she’s advancing in Phase 4 – forgiveness of student loans,

rolling back the limitations on State and Local Tax (SALT) deduction from the tax reform

bill, a massive infrastructure stimulus (President Trump today likewise called for $2 trillion

in infrastructure spending in the next stimulus.). The priorities MUST be to save existing

American businesses through a broad federal facility that can contract with private

industry (as in, our own) on a voluntary basis to deliver this relief.

As we noted last night, the $350 billion SBA loan/grant program may run out of money in a

flash, as soon as lenders get the guidance, they need from the Administration to be issuing

checks. That argues for a political opportunity. What argues against it is the fact that it is

very dangerous for Congress to even convene given the growing number of Members of

Congress who have acquired the virus.

Tuesday, March 31, 2020 (morning)

• This morning, The Council joined other trade groups and took decisive action to stabilize markets from

the economic hemorrhaging experienced over the past several weeks by the COVID-19 pandemic. The

Council is now asking Congress to create the COVID-19 Business and Employee Continuity and Recovery

Fund.

• The economic disruption caused by COVID-19 knows no boundaries and impacts all of your clients.

That is why we are leading a campaign alongside insurance carrier partners and consumer groups of all

sizes to create a national mechanism that utilizes the commercial insurance framework to deliver liquidity

to your clients, fast.

The Recovery Fund is modeled after a streamlined version of the September 11th Victim Compensation

Fund. It would be backed by the federal government and be authorized to contract with interested

businesses to administer and facilitate the distribution of federal monies and liquidity to businesses and

their employees. The relief would be tied to requirements to keep employees on the payroll, maintain

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worker benefits, and meet financial obligations. Strong anti-abuse provisions, including post-event audits,

would be included.

The federal facility for business continuation does not compel insurers, brokers, TPAs or others to contract

with the federal government for distribution of funds. However, we have heard an outpouring of sentiment

from the commercial brokerage community supporting engagement with the government to assist clients

in obtaining relief.

• This effort continues to evolve daily, and momentum is stronger than ever. Congress may be in recess until

April 20, but congressional staff is returning this week to begin considering details of a potential Phase 4

economic package. We are advocating that any additional economic package includes the Business

Continuity and Recovery Fund as a vital component to ensure that economy is quickly able to get on its

feet after defeating COVID-19.

Summary of the Recovery Fund and outlined here:

Purpose:

Protect lost wages for employees unable to work because of COVID-19 illness

Preserve jobs through payroll assistance to help businesses retain employees

Support recovery through solvency assistance

Support women-owned and minority-owned businesses impacted by COVID-19

Program Administration:

Establish within Treasury an expedited and streamlined relief program run by a special federal

administrator

Authorize the program to contract with third parties that agree to assist with application filing

and review

- Administratively enforced. Third parties are shielded from any liability except for

gross negligence, willful misconduct, or fraud

Fund the program through advanced authorization of appropriations: no pre-funded pool of

money; rather, the creation of an obligation of the federal government (same funding structure

as the 9/11 Victims Compensation Fund)

Recovery Compensation:

The program provides a simple-to-file and audit form that can be electronically filed to quickly

provide liquidity to businesses to maintain their viability and ability to retain employees

- Form requires information on impairment and known collateral sources

- Formula-based compensation for payroll, payroll support, operating expenses (such

as rent and interest expense on pre-crisis debt), and lost income of sick employees

- Program may also provide assistance for lost revenue (but not lost profits)

Interim expedited assistance may be provided

Recovery compensation reduced by any interim assistance and collateral sources

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Eligibility:

Small businesses, nonprofits, veterans’ organizations, and tribal businesses (500 or fewer

employees); as well as

Businesses of any size that can demonstrate impairment by COVID-19

Prioritization:

Sectors most impacted by COVID-19 losses

Businesses with high proportion of employees who would otherwise be unemployed

Businesses that are essential critical infrastructure

Timeline:

30-day turnaround for prioritized applications; as soon as practicable for all others

15-day turnaround for expedited interim compensation

• Separately, The Council is aware of an organized campaign started out of California to pressure insurance

brokers producing business interruption policies to advocate for liquidity programs like this one.

Monday, March 30, 2020

• A lot of developments today. Keep your eyes peeled for an alert first thing tomorrow morning

(hopefully), as we think that you’ll begin to see the fruit of efforts among the policyholder community and

the insurance community coming together on the “business continuation facility” that we’ve written

much about in this space in the last two weeks. Much uncertainty remains, but much progress has been

made in the insurance/business community in getting on the same page with respect to “Phase 4.”

Many GOP leaders last week seemed to want to wait and see if another massive

stimulus/perpetuation/recovery bill would be necessary. That sentiment is withering. One of the members

of The Council’s government affairs team was on the line with a prominent senator this afternoon who said

he is concerned that the CARES Act’s SBA small business loan/grant program alone will exhaust its $349

billion appropriation in only a couple of weeks, absolutely necessitating another major package.

• We continue to have a lot of incoming questions on that SBA program. We know you are seeing a torrent

of information. But, hot off the presses, we hope this document on the Paycheck Protection Program from

The Council’s legal team at Steptoe & Johnson will be useful to you and your clients.

Saturday, March 28,2020

• No news of note since last night on what a “Phase 4” economic package might look like, or the timing

of it. We continue to support the creation of a federal facility that could privately contract with industry

players (once again, we have to underscore, on a voluntary basis) to pump out more business continuation

funds.

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• Also, there is another fix we are going to need. Amid the pandemonium of the construction of the $2.2

trillion legislative package, Sen. Tim Scott (a constant leader on insurance issues) reached out to Small

Business Committee Chairman Marco Rubio on our behalf to have a provision added to the SBA

loan forgiveness program, wherein insurance premiums of all kinds would count as “forgivable” –

just like payroll expenses and rent/mortgages for businesses of under 500. He had received assurance that

this would be included, but in the final hours of the debate, “insurance premiums” enumerated under the

kinds of expenses that SBA loans could be used for, but NOT explicitly included among the enumerated

payments that could be forgiven. By the time the problem was identified, the section had been closed.

However, Sen. Scott’s office feels assured by the Committee that their intent was to include all insurance

premiums, and this is an important “technical fix” that we are going to need in a Phase 4 package.

(Note however that benefits premiums ARE subject to being forgiven, given the nexus to payroll.)

Meanwhile, here’s a link to a helpful guide to the small business provisions from Rubio’s committee.

Friday, March 27, 2020

• The $2.2 trillion CARES Act was approved by voice vote in the House this morning and signed by

President Trump, and hopefully it will provide some solid relief to the economy and our clients. Yes, it is

the largest emergency spending bill ever enacted by far, but the overwhelming sentiment we are hearing is

that further stimulus is going to be needed.

The obvious facts that demand it:

The legislation is thin on liability protections. We know pandemic issues are going to be litigated for

years in any event, but surely Congress can provide relief from the most opportunistic of the plaintiffs’

bar that are already circling.

Legislators did as much as they could to try to target resources on the most jeopardized and deserving

businesses in the economy. But CARES picks winners and losers. There should be a more broad-based

federal facility to promote business continuation.

Even some conservative economists have noted that our GDP in 2019 was $20 trillion. So, in this

unprecedented meltdown, is it unimaginable to spend one-fourth of that in stimulus?

Thursday, March 26, 2020

• With the $2.2 trillion Coronavirus Aid, Relief and Economic Security Act (the CARES Act) relatively

assured to be approved in the House and signed into law tomorrow, the markets at least breathed a sigh of

relief though the tragic toll of the pandemic continues to rise (with the horrifying news tonight that the

U.S. now leads the world in confirmed coronavirus cases). In-boxes are flooded with inquiries and anxiety

as to how – and how much – the legislation is going to afford clients a lifeline of liquidity.

You and we are seeing a lot of analysis from consultants and law firms outlining the provisions of the law.

The best analysis we can share is authored by The Council’s legal team at Steptoe & Johnson - Senate

Passes Omnibus CARES Act. We hope it answers a lot of your questions.

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• We completely understand why our friends in Congress, on both sides of the aisle and in both chambers,

are exhausted, angry and have just achieved the biggest stimulus in our nation’s history. But a fourth bill

is going to become imperative, and Republican leaders especially need to be locking their head around it.

The question, then, is what will the structure be? If you’ve been reading this newsletter, you know that

your advocates in Washington have been working extremely hard to achieve a consensus within the

insurance industry to advocate for a new federal facility to fund liquidity utilizing private sector

contractors (presumably insurers, brokers, TPAs, loss-adjusting firms, etc., on a purely voluntary basis).

We expect developments on this front as well tomorrow, after the President has signed the CARES Act

into law. The next critical step is deeper engagement with the major organizations representing

policyholders. Right now, there is goodwill there and we hope this effort will bear fruit.

But there are obvious challenges:

How do we make a new federal facility jibe with the CARES Act? How can we eliminate

any potential for double-dipping?

How will Congress respond when the money for CARES benefits runs out?

Will Democrats ever be receptive to all policyholders being treated essentially the same,

when many of them will include large businesses?

• As we have previously reported, a number of states have issued guidance regarding the suspension or

deferral of premium payments because of concerns that insureds (especially those with upcoming

renewals) may not be able to make premium payments during the crisis.

As of today, a total of 29 states have made such pronouncements, most of them encouraging or requesting

voluntary compliance by insurers, with only eight states (Alaska, Arkansas, Georgia, Mississippi, Ohio,

Oregon, Washington, and West Virginia) making compliance mandatory. Our legal team at Steptoe &

Johnson is tracking the action.

• One helpful tool: Johns Hopkins has a new interactive map, which maps COVID-19 cases by county.

Wednesday, March 25, 2020

• Late last night, the “Phase 3," $2 trillion stimulus/COVID-19 response legislation” advanced in the

Senate, and we feel confident, notwithstanding procedural obstacles that will be overcome, that this

legislation will move in the House and be signed into law.

We hope you are following our daily updates with intelligence on all things related to regulations and

policy impacting the commercial insurance brokerage industry regarding the pandemic crisis. Our legal

team at Steptoe & Johnson is evaluating all of the provisions of this legislation, and we will all do

everything we can to unpack the provisions of this $2 trillion plan for you and your clients. And we will

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keep you fully informed of our efforts to assist you and your clients of our efforts to address the liquidity

crisis impacting all.

• The $2 trillion stimulus bill that was announced with bipartisan agreement in the early morning hours this

morning and was being held up on the Senate floor by Sens. Lindsey Graham (R-SC), Tim Scott (R-SC),

Ben Sasse (R-NE) and Rick Scott (R-FL). According to reports, at issue is language surrounding

unemployment insurance, which the four senators say would allow workers to be paid more on

unemployment than what they would make while employed. Even if the measure gets resolved, there are

big procedural hurdles in the House tomorrow if even a single member objects, as unanimous consent will

be required. But as we predicted yesterday, the bill will get done, because the alternative is unthinkable.

Cribbing from our friends at Axios, here is the highest-level collection of big-picture bullet points:

For most people: One-time checks for up to $1,200 a person, and $500 per child, even for those who

have no income and those who rely on Social Security and disability. The checks start to phase out

after $75,000 of income.

For the unemployed: Extended and upgraded unemployment insurance — including for gig workers

— for four months with an extra $600/month over the existing program.

Use of retirement funds: The bill waives the 10% early withdrawal penalty for distributions up to

$100,000 for coronavirus-related purposes, retroactive to Jan. 1.

For hospitals and health care workers: $100 billion into hospitals and the nation's health system.

For state and local governments: $150 billion.

For small businesses: (500 employees or less): Forgivable loans and cash-flow assistance from a $350

billion program.

Large corporations: $500 billion in loans, loan guarantees and other investments, overseen by a

Treasury Department inspector general. These loans will not exceed five years and cannot be forgiven.

Airlines will receive $25 billion (of the $500 billion) for passenger air carriers and $4 billion for cargo

air carriers.

Schools: $30 billion in emergency education funding.

Transportation: $25 billion is dedicated to emergency transit funding.

• The Council today hosted an hour-long webinar (slides here) for a couple thousand of our brokerage

members on the legislative and regulatory issues we’re following, curating, and advocating on, both at the

state and federal level.

By far the most questions that came in during the call were regarding the $350 billion Small Business

Administration “loan” program, wherein there will be massive forgiveness of loans for the payment of

payroll and rent. Here is a summary of some of the provisions from Chairman of the Senate Small Business

Committee, Senator Marco Rubio (R-FL). Our legal team at Steptoe & Johnson is working on a

comprehensive analysis that we will share with you once complete.

Once this bill is finally-finally complete, and all of the stakeholders have unpacked/digested what it means

to them, attention will invariably turn to a “Phase 4” bill, and no serious observer can fully predict the

contours of such a package, or the inevitability of it. We continue to work with sister insurance trade

associations, in close consultation with major policyholder groups, on a potential federal facility for

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business continuity – one in which the government could contract with private entities (presumably

insurers, brokers, TPAs, etc.) to provide greater liquidity to troubled client markets (on a voluntary basis).

• Meanwhile, today the brushfires continued in states where legislation has been introduced to force insurers

to cover business interruption insurance notwithstanding viral contagion exclusions. There have been

incorrect reports that the New Jersey Assembly was going to take up a pending measure today on the

subject. The legislation has also been introduced in both the Ohio and Massachusetts legislatures, and

we’ve been seeing increasing activities of trial lawyers circling this issue. The Council firmly believes each

of these efforts to alter contractual terms are unconstitutional.

• Earlier today, the National Association of Insurance Commissioners released a helpful statement on the

subject, noting that business interruption “policies were generally not designed or priced to provide

coverage against communicable diseases.” The National Conference of Insurance Legislators (NCOIL)

also released a statement and sent a letter to Members of Congress expressing similar opinions

• This afternoon, our chief legal officer Scott Sinder was asked by a reporter for Politico, what the impact

on the industry would be if the BI exclusions did not hold.

Here is his response:

“If there were no exclusions, the lost business here is in the trillions. To size that, I think

that the total 9/11 losses were around $40B (in 2001 dollars). The TRIA program put into

place has a total liability cap for government and insurer TRIA losses of $100B. If losses

exceed that amount, then everyone gets paid pro rata. So, if there are $1 trillion in losses,

everyone would get 10 cents on the dollar.”

“Total commercial insurance premiums in the U.S. are somewhere in the $250-300 billion

per year range. Current projections are that we are really going to need $5 trillion in federal

relief. So, you would have to dedicate 20 years of premiums to pay for this loss. And the

industry already runs on a loss ratio that does not leave much in profit after all the normal

course claims are paid. So how do you fashion an industry skin in the game program with

all of that in play?”

• One of the other consequences of the Phase 3 bill is that Congress is kicking the can down the road on

resolution of any of the issues regarding prescription drug reform or surprise medical billing, until the lame

duck session of Congress after the election. According to Politico Pro, the stimulus package reportedly

extends funding for key health programs through November 30, delaying the deadline from its previous

expiration in mid-May

Tuesday, March 24, 2020

• Markets turned sharply up today as expectations grew for an agreement on the $1.8 trillion “Phase 3”

stimulus package. The legislation is aimed at flooding the economy with capital to revive businesses and

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households that have been knocked off course. Though details remained fluid, the legislation would

include direct payments of $1,200 to many American adults and $500 for every child in a household who

is claimed as a dependent and would create roughly $850 billion in loan and assistance programs for

businesses, states and cities. There would also be large spending increases for the unemployment insurance

program, as well as hospitals and healthcare providers that are being overwhelmed by the crisis.

• Here is a good overview of where we stood – at least at 4:00 p.m. today – by Bloomberg Government. The

key concession made to Democrats is greater independent oversight for major beneficiaries of the federal

largesse (though we can’t help but note there’s a big difference between oversight of financial

institutions post-TARP versus impacted innocent industries shut down by COVID-19.) Despite the

general optimism, as of this writing, negotiators were still facing disagreements over spending on the

Supplemental Nutrition Assistance Program and assistance for airlines. Concerns over the food stamp

provision, in particular, have raised fears that the measure would have trouble passing the Democratic-led

House by unanimous consent, a procedural move that would allow the chamber to vote on the bill without

calling most members back to Washington.

• As noted in yesterday’s report, The Council is in the middle of conversations and negotiations regarding

the establishment of a federal facility to provide liquidity relief to impacted businesses utilizing private

sector contractors, as many Council member firms have expressed strong interest in being “off the

sidelines and on the field” of helping to provide aid to impacted clients. Assuming the industry can

speak with a collective voice on this subject (we are optimistic), the next move would be to see if we can

get on the same page as the policyholder community – deeply impacted communities like the International

Council of Shopping Centers, the Real Estate Roundtable, the National Restaurant Association, the

National Retail Federation, the International Franchise Association, and the like.

• Here is a story that ran today on a prospective effort to create a BI federal backstop. It is all interesting and

accurate (especially regarding the draft outline proposal we saw last week from House Financial Services

Committee Chairwoman Maxine Waters), but we feel that all of this is way premature. (As an association,

we view none of this as premature – with all of us looking down into the abyss – but we are just expressing

political reality.)

• The National Conference of Insurance Legislators (NCOIL) has started internal discussions to address

the business interruption issue that has been the focus of The Council and insurance industry trade groups

at the federal level for many days. In a communication to members, NCOIL’s CEO, former New Jersey

Insurance Commissioner Tom Considine, recognizes that commercial policies generally exclude coverage

for viruses such as COVID-19. Considine then generally describes a proposal, which is intended to (1)

ensure insurer responsibility and contribution, (2) provide businesses and professionals business

interruption relief, and (3) prevent a threat to insurer solvency.

It is important to note that NCOIL actions are not binding on the states – once NCOIL adopts a model,

each state would have to enact the model for it to become law in that jurisdiction. Moreover, we note that

the majority of state legislatures are not in session currently – they have either adjourned for the year or

are in recess temporarily due to the COVID-19 outbreak. Having said that, actions on this issue by NCOIL

and individual states can have far-reaching ramifications, so we will be watching this closely.

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Late this afternoon, it was reported that legislation in New Jersey (A-3844)—which would require every

property policy that provides coverage for the loss of use of property and for occupancy and business

interruption to be ‘construed’ to include coverage for business interruption due to COVID-19—was

brought to the Assembly floor by an emergency vote. We are told that the bill was pulled before a final

vote. No companion bill has been introduced in the Senate to date. Discussions with the bill sponsors and

legislative leadership are ongoing.

Monday, March 23, 2020

• Regarding efforts to enact “Phase 3” of stimulus legislation today, the only word that comes to mind from

your government affairs team is…gob smacked. Never before have we seen such anger, vitriol and personal

animosity playing out on the floor of the U.S. Senate, over the major provisions of the $1.8 trillion package

proposed yesterday by Senate Majority Leader Mitch McConnell.

The bill notably does NOT contain provisions calling for the creation of a federal facility to administer

business continuity coverage through a federal facility that could utilize private industry (presumably

including the brokerage sector) on a purely voluntary basis. We are in close contact with other insurance

trades and the policyholder community, and such a response is a very fluid and sensitive proposition at this

point in time.

• Speaker Pelosi is expected to soon release the House Democrats Phase 3 version of the federal

government’s response to COVID-19. Here is a section-by-section summary.

Of note, it would provide private sector and public sector employees who have been on the job for

at least 30 calendar days with the right take up to 12 weeks of job-protected leave under the Family

and Medical Leave Act, regardless of the size of their employers. It would also prohibit the Secretary

of Labor from carving out employers with less than 50 employees. Additionally, after two

workweeks of unpaid leave, employees will receive a benefit from their employers that will be no

less than two-thirds of the employee’s usual pay, up to $200 a day.

With concern to healthcare, it would provide for a two-month open enrollment period for ACA plans.

It would also waive cost-sharing for patients’ treatment related to COVID-19 who are enrolled in

private insurance coverage (the Federal government is required to reimburse insurers for the forgone

cost-sharing). Additionally, it would provide subsidies to allow workers to maintain their employer-

sponsored coverage if they become eligible for COBRA or are subject to a temporary furlough. It

would establish a two-year risk corridor program to provide payments to individual and small group

market plans for extreme losses and help mitigate premium increases for consumers.

Sunday, March 22, 2020

• The U.S. Congress is moving fast on phase III of a COVID-response bill known as the Coronavirus Aid,

Relief, and Economic Security Act (the amended CARES Act).

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Leaders McConnell and Schumer are still at odds over key provisions of the legislation, primarily over

provisions for corporations getting federal assistance, including policy on stock buybacks and executive

pay and protections for individuals facing eviction.

Following failed negotiations today, Speaker Pelosi now intends to advance competing legislation from

House Democrats who want to see stronger protections for employees and significant more money for

hospitals and providers. CLICK HERE for the latest analysis of the CARES Act from our counsels at

Steptoe & Johnson.

• Last week, The Council advocated for the inclusion of insurance premiums to be explicitly included as a

form debt eligible for federal assistance to small businesses (currently defined under 500 employees) as

part of the $1.6 trillion stimulus package. We are incredibly grateful for the intervention of Sen. Tim Scott

(R-SC) to advocate for this specific provision, and we are grateful that Senate Small Business Committee

Chairman Marco Rubio (R-FL) agreed with Sen. Scott.

• The Council has been deeply engaged throughout the past week in encouraging the insurance industry and

the policyholder community to come together in support of a federal facility tasked with paying (at least a

percentage of) business interruption claims. The proposal we have embraced would afford the Treasury

Department to contract with insurers/brokers/TPAs/loss adjusters on a purely voluntary basis. We regret

to say that due to many factors, this issue is on “pause” for the moment.

Thursday, March 19, 2020

• Congressional officials released the “Phase 3” recovery text -High-level list of Coronavirus relief measures

• There is a rapidly gathering clamor for a federal stimulus that uses the commercial insurance

industry’s existing business interruption platform.

For example, this release from the International Franchise Association, calling for the government

to fully fund the business interruption coverage that has been excluded from policies.

• The International Association of Shopping Centers and others are joining in the call for a program that is

similar to the Terrorism Risk Insurance Act (TRIA), which is a public/private partnership that was enacted

by Congress (and subsequently reauthorized) in the aftermath of the 9/11 terrorist attacks.

• The insurance carrier community has not welcomed the idea of a federal partnership, especially not

one that would be retroactive.

• There is been a great deal of discussion, and concern, about coverage for business interruption losses due

to the widespread business closures as a result of the coronavirus outbreak. The New Jersey legislator’s

bill introduced on Monday that would force insurers to provide business interruption coverage for

losses (due to Coronavirus despite clear “virus” exclusions in the policies) and then spread the financial

burden via a new special purpose apportionment on NJ carriers has been tabled in NJ for the time-being

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(the legislature has recessed temporarily due to COVID-19 fears), but it is still a threat in NJ and

potentially other states (Illinois and New York legislatures are possibly considering the approach).

Where did this come from? In 2006, the Insurance Services Office (ISO) was successful in

getting state regulators to approve an exclusion for “Loss Due To Virus Or Bacteria," which

applies specifically to business interruption, among other coverages. As we understand it, this

exclusion is in virtually all business interruption polices. Just last month, ISO developed

endorsements to provide an insured with the option of purchasing coverage for virus-related

losses, thus over-riding the exclusion. The endorsements would provide limited business

interruption coverage for business interruption due to actions by civil authorities in order avoid or

prevent infection or spread by or from the Coronavirus. These endorsements have not been filed

or approved by the states.

Wednesday, March 18, 2020

• The Council daily briefing newsletter reports there are growing calls on Capitol Hill for a federal guarantee

of payments by insurers for business interruption claims irrespective of viral exclusions.

• The most important proposal to date is an outline of the creation of a federal program modeled

directly after the Terrorism Risk Insurance Act, which would mandate the prospective offer of

pandemic business interruption coverage with a large federal backstop (note: this does not appear to be

retroactive). This is being promoted by House Financial Services Committee Chairwoman, Maxine Waters

(D-CA), but there are Republican members of her committee who are likewise interested in working on

such a resolution. Initial draft that is being circulated

• This morning, the four major property/casualty trade groups, including The Council, received this letter

authored by Representative Nydia Velazquez (D-NY) and 17 other members of Congress, urging the

industry to pay business interruption costs regardless of any exclusions. (note that 13 of the signers are

Democrats, five are Republicans.)

Tuesday, March 17, 2020

• The Council daily briefing newsletter reports that the New Jersey Bill A-3844, forcing business

interruption insurers to provide coverage for COVID-19, was approved by a committee of the legislative

today, but tabled on the House floor. Not confirmed is talk that similar legislation may be introduced in

Illinois.

• The New York Department of Financial Services today announced it has adopted a new emergency

regulation requiring New York State insurance companies to waive cost-sharing, including, deductibles,

copayments (copays), or coinsurance for in-network telehealth visits. Here is a copy of DFS’ guidance on

telehealth or telemedicine services.

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• Treasury Secretary Steven Mnuchin characterized the Administration’s upcoming $1 trillion stimulus

package as primarily a measure to compensate Americans and small businesses especially for “business

interruption.” While we don’t yet have details on what Congress and the Administration will fully include

in this package, here is a summary of the House-passed legislation.

Monday, March 16, 2020

• The New Jersey State Legislature took up discussion of draft NJ Bill A-3844 to force business interruption

insurers – despite a “Virus” exclusion in their policies – to provide coverage for COVID-19, and then

spread the financial burden via a new special purpose apportionment on other, non-business interruption

carriers insuring New Jersey risks.

Source: https://www.coverageopinions.info/Vol9Issue2/NewJerseyCOVID.html

Background: In 2006, ISO adopted a mandatory exclusion for business interruption policies

designed to preclude coverage for virus-related losses. The New Jersey Legislature is now trying to

eliminate it.

• A New Orleans restaurant has filed a lawsuit on the business interruption issue seeking a declaratory

judgement that its insurer should cover related business interruption losses. “It is clear the contamination

of the insured premises by the coronavirus would be a direct physical loss needing remediation to clean

the surfaces of the establishment,” the suit says.

Source:https://www.businessinsurance.com/article/20200317/NEWS06/912333570/New-Orleans-

restaurant-sues-for-coronavirus-business-interruption-cover-Oceana-G

This communication is for informational purposes only. Although every reasonable effort is made to present current and accurate information, RHSB makes no guarantees of any kind and cannot be held liable for any outdated or incorrect information. Please consult with outside counsel before implementing any policy or procedure.