RIMS joins fresh push for government-backed pandemic scheme

Patrick Sterling, RIMS board director and senior director of legendary people and risk management at restaurant chain Texas Roadhouse, has joined Congresswoman Carolyn Maloney and stakeholders from the small business community and the insurance industry to stress the urgent need for Congress to pass H.R. 7011, the Pandemic Risk Insurance Act (PRIA), which was introduced by Ms Maloney at the end of May.

RIMS officially announced its support for the state-backed insurance scheme in early June. The PRIA would create a framework that would enable insurance companies to offer business interruption insurance (BI) cover for pandemics. Under the plan, a reinsurance programme would be created, supported by a federal backstop to ensure the insurance industry would be able to provide sufficient capacity for the risk.

“As the risk management lead for Texas Roadhouse, my industry peers, and many others, are continuing to struggle to manage the complexities of the Covid-19 pandemic – as many of our existing policies fail to cover its impact,” said Mr Sterling.

“RIMS does not agree with those who say that pandemics are not insurable. As a united front, carriers and the federal government can develop a solution to share the financial risk of future pandemics. RIMS members believe a public-private programme will establish a viable insurance market and create certainty for businesses across the country. This collaboration makes sense and that is why we support the Pandemic Risk Insurance Act of 2020 – HR 7011,” he added.

Following the roundtable discussion, Congresswoman Maloney said: “As we saw during today’s roundtable, there is broad consensus that we need a programme like the one created by the PRIA – to provide business owners and our economy with better stability in the event of any future pandemics. A forward-looking, public-private partnership like this, one supported by a federal backstop, will help businesses keep their employees on payroll and weather the storm that a public health emergency brings. Congress needs to be proactive in helping businesses protect themselves from economic losses as a result of pandemics, which, as we’ve seen, can be devastating to businesses of all sizes – from the mom-and-pop grocery down the street to institutions like Lord & Taylor.”

The need for a state-backed pandemic insurance scheme becomes more obvious day by day in the US, as insurers continue to fend off legal efforts by small businesses to claim on their BI policies.

On Monday this week, another federal court in California ruled that an insurer does not have to cover BI losses for a policyholder that closed its operations because of the Covid-19 lockdown.

The court ruled that a Travelers unit is not required to pay a lost income claim submitted by Mudpie Inc, a San Francisco children’s clothing and toy store, because it did not suffer a physical loss under the terms of the policy.

US District Court Judge Jon Tigar noted that the Travelers policy says the insurer “will not pay for loss or damage caused by or resulting from… loss of use or loss of market”.

The separate provision for loss of use suggests “that the ‘direct physical loss of… property’ clause was not intended to encompass a loss where the property was rendered unusable without an intervening physical force”, the judge ruled, thus granting Travelers motion to dismiss the case.

This followed similar victories for Travelers and Farmers Insurance in California, in cases involving claims for BI losses incurred by the lockdown.