Frequently Asked Questions
Ohio Insurance Institute is providing the answers to frequently asked questions about COVID-19 and business interruption coverage. Our goal is to offer a more clear understanding of our state and national relief efforts, to help limit your personal health risk and economic risk during this pandemic.
For additional information also see Pandemic and Infectious Disease Preparedness and Response an article from our member, MSO.
1) Q: Where can I find useful information about the COVID-19 pandemic?
A: In addition to the helpful daily televised briefings and updates from national, state, and local leaders, you can learn more about what is happening here in Ohio by visiting the Ohio Department of Health website www.ODH.Ohio.gov or calling 1-833-4 ASK-ODH.
Ohioans can use these resources to receive daily updates about the number of confirmed cases, guidance on essential and non-essential workers/industries, economic resources for Ohioans, and more.
2) Q: What should I be aware of during and in the aftermath of the COVID-19 pandemic?
A: In addition to the health, lifestyle, and economic challenges of the COVID-19 pandemic, Ohio taxpayers and families should be on guard against scams and fraud.
Especially as the federal government processes and distributes trillions of dollars in unemployment compensation and economic stimulus money.
Follow guidance from state and federal agencies to make sure you promptly receive all the financial help you are entitled to.
3) Q: How has this crisis impacted Ohio’s insurance industry?
A: Like nearly every sector of the U.S. economy, COVID-19 has had a significant impact on the insurance sector and the everyday lives of Ohio’s insurance industry employees.
Despite the changes, Ohio’s insurance agents and representatives are eager to help their clients and communities in this difficult time by playing their part in protecting Ohio consumers, families, and businesses. Ohio’s Insurance industry has been impacted, but we have the financial strength and stability to withstand this pandemic.
4) Q: What is the CARES Act?
A: The largest and most comprehensive government relief program in U.S. history, the COVID-19 Aid, Relief, and Economic Security Act (the “CARES Act”) is the $2.2 trillion rescue effort by the federal government to increase, expand, and accelerate the delivery of unemployment benefits to the American people. These funds are being made available to American workers, including individuals who are unemployed, partially unemployed, or unable to work due to COVID-19. Read more about these efforts here.
5) Q: What about other business losses triggered by this service interruption?
A: Business and insurance leaders are also encouraging the federal government to create a national Business and Employee Continuity Fund to cover unanticipated business disruption losses.
6) Q: What is Business Interruption Insurance?
A: Business Interruption Insurance is a type of property and casualty insurance policy that can cover short term loss of business revenue caused by interruptions triggered by direct physical loss of or damage to property. For example, this coverage may be used to protect a business for lost income caused by fire at the insured premises or other covered loss.
Business Interruption Insurance, however, does not typically cover losses incurred by a virus or pandemic. Since World War II, insurance policies have excluded acts of war from coverage under the same principles of insurability.
American insurers and consumers faced similar questions during the 2006 Ebola virus crisis. Then as now, it was recognized that Business Interruption Insurance does not apply to infectious diseases caused by a virus or bacteria unless a policy is specifically written to include those losses. Virus-based and bacteria-based events are not direct physical loss of or damage to property. For more information see the Insurance Information Institute’s Understanding Business Interruption Insurance and Pandemics Fact Sheet here.
7) Q: Would Business Interruption Insurance Coverage Help Ohioans during the COVID-19 pandemic?
A: No premiums were collected and no reserves were set aside to cover COVID-19 claims, so retroactively applying Business Interruption Insurance would create a catastrophic drain on Ohio’s insurance resources and overall economic stability.
Current estimates put U.S. COVID-19 triggered business losses at $220 billion to $383 billion a month, far outstripping the U.S. insurance industry’s entire statutory surplus of $800 billion. This would leave no funds to cover Ohio policyholders’ fire, flood, or storm losses and deprive these consumers of the protection and service they count on.
These losses would also bankrupt many Ohio insurance companies and eliminate thousands of Ohio’s 37,000 insurance industry jobs, adding to the unparalleled job losses already caused by coronavirus shutdowns. Mass insurer insolvencies would occur within weeks if insurers were required to retroactively pay claims for which premiums were never paid.
Additionally, mandating this coverage would have a potentially negative impact on small businesses’ ability to receive Small Business Administration (SBA) grants or loans. The SBA expressly prohibits double-dipping that would allow a company to accept government funds and an insurance settlement for the same loss.
8) Q: What are the general legal ramifications of retroactive coverage?
A: Retroactive coverage would undercut bedrock American insurance law by injecting every insurance agreement with items not included in the pricing and coverage terms negotiated between the insured and the insurer.
These changes would void the validity and obligations of the mutually agreed upon insurance contract terms, principles that have been repeatedly endorsed by Congress, state legislatures, regulators, and America’s judicial system.
Applying this principle to general contract law would make every contract subject to re-interpretation by a future legislature or judge to suit their own opinion, not those of the contract signers.
Such retroactive “re-drafting” of contracts violates both the Ohio Constitution and the Constitution of the United States of America. Both foundational documents prohibit states from retroactively impairing contracts.