Businesses, insurers want federal backstop to interruption insurance
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Brick-and-mortar retailers are fighting for survival in this pandemic economy, and some just aren’t making it.
On Thursday, Century 21 Stores, a clothing chain mostly in the Northeast, filed for Chapter 11 bankruptcy. The company said the pandemic played a role, but it also blamed its insurance company.
Century 21 didn’t mince words, saying its insurers had “turned their backs on us at this most critical time.” The company says that despite having business interruption insurance, when business was interrupted due to COVID-19, claims weren’t paid out.
In this case, like many others around the country, insurers say they don’t have to.
“The insurance industry charges for a policy based on the risks,” said Loretta Worters, vice president of media relations at the Insurance Information Institute, which represents the industry. “Now, because it’s a pandemic, it was never taken into the the rates when an insurance company provided that kind of coverage. So if you’re not paying for that, imagine the amount of loss the insurance industry would pay.”
In court fights all over the country, the industry is pointing to clauses and exclusions in contracts arguing the industry isn’t obligated to, nor can afford to, absorb the pandemic losses.
In the meantime, business owners are wondering what use their insurance is.
“And then you’ll also see a lot of folks are getting renewal notices for their policies for next year, and a lot of them, their rates are going up,” said Davis Senseman, a lawyer working with the small business advocacy group Main Street Alliance. “In some cases to 300%,” Senseman said. “So it’s understandable that small business owners are saying, ‘Wait a minute, if the industry didn’t pay out because of these exclusions, why are the rates going up?'”
Both insurance companies and business organizations are lobbying Congress for a fix. Leon Buck, vice president of government relations, banking and financial services at the National Retail Federation, said insurers need a federal backstop, using the program developed after 9/11 as a model.
“What it speaks to is if there’s another terrorism event, than the insurance companies will cover a portion and the federal government will cover the majority of the costs,” Buck said. “And that’s key, because after 9/11, no one was able to get insurance.”
Century 21 noted that its insurers did help it recoup losses in New York after 9/11, but the pandemic was the crisis it could not survive.
COVID-19 Economy FAQs
What’s the outlook for vaccine supply?
Chief executives of America’s COVID-19 vaccine makers promised in congressional testimony to deliver the doses promised to the U.S. government by summer. The projections of confidence come after months of supply chain challenges and companies falling short of year-end projections for 2020. What changed? In part, drugmakers that normally compete are now actually helping one another. This has helped solve several supply chain issues, but not all of them.
How has the pandemic changed scientific research?
Over the past year, while some scientists turned their attention to COVID-19 and creating vaccines to fight it, most others had to pause their research — and re-imagine how to do it. Social distancing, limited lab capacity — “It’s less fun, I have to say. Like, for me the big part of the science is discussing the science with other people, getting excited about projects,” said Isabella Rauch, an immunologist at Oregon Health & Science University in Portland. Funding is also a big question for many.
What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?
Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”
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