Get all the latest news on coronavirus and more delivered daily to your inbox. Sign up here.
In a letter sent to Capitol Hill on Monday, the Treasury Department said that it is concerned proposals to require insurance companies to pay up “fundamentally conflict with the contractual nature of insurance obligations,” regarding legislative measures, for example, that would require companies to retroactively change their terms of agreements.
The agency believes insurers should pay “valid claims,” and officials plan to work with Congress and appropriate stakeholders to find a solution.
Business interruption insurance typically doesn’t cover communicable diseases. Instead, policies tend to cover disruptions caused by physical damage, like fire, flooding or vandalism.
Often, these policies don’t mention pandemics, although they sometimes include it as an exclusion.
The restaurant industry has threatened legal action against insurers that did not pay out for business interruption coverage.
President Trump even indicated he agreed with the prospect, alleging insurance companies should pay what is “fair.”
“You have people that have never asked for business interruption insurance, and they’ve been paying a lot of money for a lot of years for the privilege of having it, and then when they finally need it the insurance company says ‘we’re not going to give it,’” President Trump said during a press conference at the White House last month. “We can’t let that happen.”
Many companies take out cancellation insurance for an event or have business interruption insurance. Even individuals hosting large weddings may opt to take out cancellation insurance, which would typically cover something like a weather event.
After the SARS and MERS outbreaks earlier this century, InsuranceQuotes analyst Erik Josowitz told FOX Business a lot of companies revamped their cancelation policies to exclude communicable diseases. That means companies are not covered unless they purchased a specific policy.
There are options for specific coverage, including something known as epidemic insurance, but it is not a very common product.
Traditionally, epidemic insurance policies have been rare, so they tend to be more expensive, which is why companies don’t typically purchase them.
But if they become more common, and as these communicable disease outbreaks increase in frequency, the cost of coverage may fall.
FOX Business’ Hillary Vaughn contributed to this report.