The industry has been alarmed by the introduction of bills in more than a half dozen states that would require carriers to cover business interruption claims related to COVID-19, even when policies exclude viral pandemics.
Most of the bills would apply only to claims from small businesses, defined as having fewer than 100, 150 or 250 employees, depending on the bill, and some would allow carriers to seek partial reimbursement from the states.
Bills have been proposed in South Carolina, New Jersey, Massachusetts, New York, Ohio, Pennsylvania and Louisiana. Nothing has been introduced in Illinois.
Cygal said such legislation, if passed, could be challenged on constitutional grounds because the Contracts Clause in the U.S. Constitution says a state can't retroactively change contracts.
The National Association of Insurance Commissioners, which is made up of state insurance regulators, issued a statement discouraging Congress from "proposals that would require insurers to retroactively pay unfunded COVID-19 business interruption cases," as that could undermine the insurers' ability to pay other types of claims.
Asked to weigh in on the matter, Illinois Department of Insurance Director Robert Muriel said in a statement that the agency, which doesn't have the authority to change exclusions in business interruption policies, "continues to work with insurance companies on methods to provide additional relief to Illinois' business community."
Meanwhile, federal lawmakers are considering legislation that would create a government backstop for pandemic insurance, similar to a program for terrorism insurance created after 9/11.
According to a draft of the bill, the federal government would cover industry losses in excess of $250 million, up to a cap of $500 billion annually. Participating insurance companies would be charged an annual premium.
The legislative pressure offers another avenue for hope for small-business owners. About 43% of businesses are temporarily closed and have cut payrolls by an average of 40%, according to a paper from the National Bureau for Economic Research. The median business has less than one month of cash on hand.
Baylis, at Big Onion Hospitality, said an insurance payout would allow him to reopen all of his restaurants. Without it, "there's a strong possibility that we could have to close businesses down," he said.
Baylis has filled his days applying for every loan and grant available, and writing letters to legislators. This week, at his Fatpour Tap Works location near McCormick Place, he helped cook and create care packages for his furloughed employees.
"I'm going to fight until the end," he said. ___ Distributed by Tribune Content Agency, LLC.