Navigating the Legal Maze: How COVID-19 Insurance Claims are Shaping Business Recovery

The Pandemic's Impact on Business Interruption Insurance

Since the onset of COVID-19, millions of small businesses in the U.S. have been struggling to stay afloat. Amidst this crisis, a few plaintiffs' attorneys have seen an opportunity to profit from insurance litigation related to the pandemic. John Houghtaling, a prominent New Orleans-based lawyer, is one such figure aiming to retroactively rewrite business interruption (BI) insurance contracts. However, courts across the country have consistently ruled that BI insurance policies do not cover losses resulting from the pandemic. Michael Barry, Head of Media and Public Affairs at the Insurance Information Institute, emphasizes that these policies were not designed to cover simultaneous interruptions across all businesses.

The Role of Federal Government in Business Recovery

As litigation seeking to compel insurers to cover pandemic-related income losses continues, it becomes increasingly clear that such legal battles may not be the most effective way to help struggling businesses. Instead, there is a growing consensus among legal scholars and insurance industry experts that the federal government is the only entity with the reach and financial resources to assist businesses in recovering from a global pandemic. Stefan Holzberger, AM Best chief rating officer, argues that "pandemic risk does not afford insurance companies any geographic diversification due to its global nature … Only a governmental program, or perhaps a public-private partnership, could provide the backstop sufficient to compensate for lost revenue to businesses."

Balancing Power: The Role of Courts and Legislators

Sherman Joyce, President of the American Tort Reform Association, presents an alternative vision for economic recovery, advocating for elected representatives to regulate business within the U.S. rather than the trial bar. Joyce argues that the courts must restore the balance of power by rejecting the return of regulation through litigation. This perspective highlights the ongoing debate about the appropriate role of the legal system in addressing the economic impacts of the pandemic.

In conclusion, while plaintiffs' attorneys continue to push for pandemic-related insurance coverage, the legal landscape suggests that businesses may need to look beyond litigation for financial support. Engaging with federal programs and public-private partnerships could offer more viable solutions for recovery. For businesses navigating these challenges, staying informed about ongoing legal developments and exploring all available support options is crucial.