Woodbury, NY, Month 03, 2020 — The potential absence of business interruption insurance coverage for losses associated with COVID-19 has been the subject of daily media reports. State legislators have proposed various solutions to address this issue and a federal solution is also under discussion. On March 31, 2020, key insurance industry trade organizations proposed their own framework for a Congressional solution. This is a potentially important development and one we expect Congress to take up for consideration as part any further rounds of COVID-19 relief legislation.
A. The Proposed Loss Fund
The COVID-19 Business and Employee Continuity and Recovery Fund (“the Fund”) would be solely capitalized by the federal government with a public/private administrative mechanism. This framework would be similar, but not identical, to the 9/11 Victims Compensation Fund. Note, the proposal does not currently include a fund amount. Below is a summary of the program’s drafted terms.
B. What the Fund Would Cover
The Fund’s purpose would be to cover, among other losses:
- Lost wages for employees unable to work due to COVID-19 illness;
- Payroll assistance to help businesses retain employees;
- Other operating expenses such as:
- Rent.
- Interest expense on pre-COVID-19 debt.
- Lost income of sick employees.
- “Solvency assistance,” i.e. lost revenue, but not lost profit.
C. Who Is Eligible
In relevant part, eligible parties include small businesses and non-profits (500 or fewer employees) or “businesses of any size that can demonstrate impairment by COVID-19.”
D. Fund Priority
The proposed payment structure would prioritize sectors “most impacted” by COVID-19 losses; for example hospitality, restaurants, aviation/travel and other businesses. The Fund would also provide priority to businesses with a high proportion of employees who would otherwise be left unemployed. Finally, priority would also be given to businesses that are “essential/critical infrastructure.”
E. Fund Administration
Payment of claims would run through the U.S. Treasury Department. Treasury would appoint a Special Administrator. The Special Administrator would contract with “third parties” to facilitate claim filing and review. Presumably, these outside parties would include either Independent Adjustment Firms, Third-Party Administrators and/or insurers directly.
F. Application ProcessM/strong>
Applicants would file an electronic claim notice with an audit form. The application would require disclosure of:
-
- COVID-19 Loss amounts.
- Disclosure of known collateral sources. This could include any insurance claim.
- Fund payment would be offset by any recovery from an outside source such as insurance.
Interim, partial payment can be requested, which would be expedited as detailed below.
It is important to note that the Funding program emphasizes the need for expedited application review and a streamlined request for claim support. The stated turnaround for application review would be 30 days for prioritized applications, 15 days for expedited, interim payment and “as soon as practicable” for all others.
Conclusion
SterlingRisk anticipated this significant proposal and has been closely tracking all related developments. Clearly, should any form of the Fund be created as part of any legislation, it could provide significant relief to U.S. businesses. We will continue to track development of the program as Congress works through possible Phase-IV COVID-19 relief and other related legislation.
If you have any question, please contact your Account Executive or our Director of Risk Management Services and Senior Counsel, Josh Weisberg: (212-457-4206 or jweisberg@sterlingrisk.com).
