Business, Interrupted

and how those assumptions were by and large wrong. The Bloomberg Law team looked into so called virus exclusion clauses that insurers quietly inserted into many of their business policies, and how those clauses are now creating major strife between insurers and their policy holders. Here's David Schultz with more. It's hard to run a business, really hard. And I'm not talking about how it's difficult to make stuff or then convince someone to exchange their money for your stuff.

It's hard because there's just so much unforeseeable stuff that can happen. A ship bing gets damaged, someone slips and falls in your aisle, there's a fire in the place next door. All of these are things that can wreak havoc on even a successful business. Also, this Broadway has extended its shutdown shutdown or shut it down start over shutdown plan in New York City. This is why insurance exists. It can help mitigate the risk of, say, a worldwide

pandemic that shuts down Way. It feels like the entire world. And there actually is a type of insurance that covers this exact type of thing. It's called business interruption insurance. And a lot of businesses across the country and the world started filing claims on their business interruption policies when

all this madness began earlier this year. However, the vast majority of those claims were denied because years ago, the insurance companies quietly inserted clauses into all of their policies that said they wouldn't pay out in the event of a pandemic. It's almost as though they knew this could happen. Now. I'm not saying that insurance companies knew that at the end of twenty nine there would be a novel coronavirus that originated in China and that it infects humans via

the respiratory tract. If you're looking for conspiracy theories, you have come to the wrong podcast. But right now you might be asking yourself, what podcast did I come to? Well, you're listening to Business Interrupted from Bloomberg Industry Group, and I'm your host, David Schultz. This is a podcast about how businesses of every stripe, large, small, you name it, assume they had insurance that covered them in the event of a shutdown, and how those assumptions were by and

large wrong. You'll hear from myself, along with Bloomberg reporters Lydia Bayout and Evan Weinberger from our corporate desk, and David Hood from our tax desk, about what happened to those this is why, and what might happen next. So back to what I was saying earlier, you might not have seen the pandemic coming, but the insurance industry knew it might happen. Insurres did their homework and realized it was likely there would be a pandemic of some kind

at some point, that it was in fact foreseeable. They paid very close attention to the stars outbreak back in the two thousands, and he's becoming more aggressive the number of victims expected to triple within weights, and they learned lessons that other industries and even many governments didn't. How do we know this, It's all in the policies that they wrote. Well, most commercial property policies contain what is the so called virus exclusion the quote exclusion of last

due to virus or bacteria unquote. That's Scott Seamen, a Chicago based attorney with the firm Hinshaw and Culbertson who represents insurers and the commercial property policies. He's talking about our insurance held by many, many businesses. It's called business interruption insurance, and it's supposed to pay out if something out of your control happens and forces your business to shut down. It's supposed to replace some or maybe even

most of the revenue you lost during a shutdown. But, as Scott Seaman just said, nearly all of the business interruption policies issued by nearly every insurance company, not all, but just about all came with a virus exclusion attached. This amendment specifically stated that the policy will not pay out if a business is shut down due to a pandemic, and that's no accident. The introduction of virus exclusions was a direct response to the last time a coronavirus threatened

to infect all of mankind, the Stars epidemic. That epidemic caused some shutdowns in a few countries, but even then the claims were hefty, including one that reportedly totaled sixteen million dollars to an international hotel chain. Insurers saw this, it realized how much they'd have to pay out if a pandemic caused global shutdowns, and then quickly got to

work adding these exclusions in. But while the insurers knew a global pandemic was possible, if not likely, the business owners who purchased their policies did not take Julia Mayor, the owner of a cafe and restaurant in Santa Barbara, California, She called her insurance broker right after the first COVID stay at home owners were issued and at that point are broker said, you do not have virus coverage and you do not have pandemic coverage, so there will not

be any ability for you to access your insurance. And that was a very big shock for me to hear because I didn't expect that at all. I didn't expect my question wasn't am I covered? It was more when will this coverage kick in? As a result, instead of hunkering down and using her insurance money to dread water, Julia is barely staying in business and she's not alone. Business Owners across the country are getting their business interruption claims denied and denied fast, in some cases, within hours

of filing them. So this might seem like a simple story, right, It's just those greedy insurance companies again, happy to collect your annual premiums, but always trying to avoid paying out a claim. And if you're a business owner like Juliet who's had her claim denied, that might be it. But

the truth is it's actually much more complicated. If you start taking around looking at the origins of this virus exclusion and why it was even created, you wind up with existential questions about what insurance even is and why

it exists in the first place. And podcast listeners, those are the questions we're going to ask, We're gonna look at buy So many companies that thought they were covered were in fact not what this means for them, and why the insurance industry maybe winning the battle but losing the war We'll hear from coffee roasters, theater owners, restaurateurs, angry politicians, frustrated insurance regulators, the Houston Rockets, and, for

good measure, Benjamin Franklin. All will be explained. Stay with us, those nine justices in Washington that could be pretty hard to keep track up. That's where we come in. I'm Jordan Reuben and I'm Kimberly Robinson. On our podcast, Cases and Controversies, we give you a week by week accounting of the Supreme Court, the filings, the arguments, the opinions, and much much more. So check in on Fridays with Cases and Controversies to find out what's coming up on

the horizon at the Supreme Court. Download and subscribe wherever you get your podcasts. So before we go any further, we all have to be on the same page about what insurance actually is. This is the point of the podcast where I might play a clip from one of those old timey nineteen fifties instructional videos at the use of showing high school economics class but I'm not going to do that. Instead, I'm gonna go all the way back to the beginning, back when modern property insurance. As

we know it today. Was basically first conceived by this guy. You may have heard of him, Benjamin Franklin. Yes, that Benjamin Glinn. Long before he graced the bill, before he even signed the Declaration of Independence, Franklin started the Philadelphia Contributorship for the Insurance of Houses from Losses by Fire. If they were around today, it would probably be called the pc I HLF. But that's neither here nor there.

Franklin didn't invent insurance, but he did help to invent property and casualty insurance, and importantly, or at least importantly for the purposes of this podcast, the pc I HLF was the first insurance company to inspect properties and issue policies based on their risk. If your home was made of faulty materials or restore flammable materials in your basement,

no policy for you. Why was it such a big innovation because it allowed the insurer to manage its own risk, the risk of having to pay out more in claims than it's actually collected. As long as everyone's house doesn't catch on fire all at the same time, if you're fine, your policy holders pay their premiums. Their houses don't catch on fire, so they don't file claims, but when they do, you can afford it because you've insured lower risk houses. Hopefully.

That's a really fundamental principle. And here's another way to put it. This is Dani Schwarz, a law professor at the University of Minnesota who specializes in insurance. The broad principle is one that's been around for for really the history of insurance, which is, insurers thrive when they can ensure risks that are not correlated with one another. So insurers like to find risks that are not correlated, and so then that's the question of, okay, well, how do

you identify correlated risks? And so historically there were exclusions for war, there were exclusions for earthquakes, or exclusions for floods, lots of events that could simultaneously result in coverage for policy holders. That is a really important point. Insurers don't want to cover events that could cause all of their policy holders defile claims all at the same time. In other words, and unforseeable event is okay as long as it's both unforeseeable and discreet. But what does that mean

for small businesses small business owners. Let's say, for example, a cafe owner in Santa Barbara, California. They're just trying to earn revenue and not go out of business. A business insurance policy is something they know they have to get, but for most small entrepreneurs it's probably not among the top one hundred most important decisions they have to make

in running their business. However, there are now a whole lot of business owners who are really wishing they spent more time looking over the insurance policies they assigned years ago. And this isn't just a big business thing or a small business thing. It's not limited to one industrial sector or one part of the country. Celebrity chefs are having

problems with their insurance. Big clothing retailers are having problems, and even the NBA's Houston Rockets filed the lawsuit after their business interruption claim was my apologies rejected Bloomberg Laws. Lydia b you didn't speak with James Harden, but she did speak with a lot of small business owners and she says, right now, many feel like they were sold a bill of goods. Lydia takes over the story from here. Julia Meyer, the cafe owner we heard from earlier, has

had truly awful luck with her business Interruption Insurance. The claim she filed this year after the pandemic shut her cafe down wasn't the first time she thought her policy would cover her but didn't. Back in, wildfires burned hundreds of thousands of acres in and around Santa Barbara, where her cafe is located. Huge parts of the southern California town were evacuated. So we were watching the fire kind of come across our city and they were evacuating block

by block. Julia actually proactively called her insure before she shut down her cafe. Are Insurance said, well, once you're once your business falls into a mandatory evacuation, you we can talk. And we were one block away from the mandatory evacuation. That's the thing that time, Julius policy only kicked in if the government forced her business to shut down. It didn't matter that she couldn't have kept her cafe open anyway. There weren't many customers lining up to eat

sandwiches and drink coffee with a wild fire looming. The policy required a ruling that's called a civil authority. Then, less than a month later, heavy rains came and with the landscape charred from the fires, mud slides became a problem. They are finding many cars. We don't know where those vehicles were parked last night, sometime after the rain came, mud surrounded them and carried them off. In fact, they were so bad they blocked the main highways leading in

or out of the town. Julia thought, well, if people can't access my business because a civil authority shut down the roads, maybe that fits the criteria. So she tried again and reopened her already denied claim. But no luck. That was also denied because again we could get into our doors. Ultimately, Julia says she lost two months of revenue and survived only thanks to a loan from the

Federal Small Business Administration. Bonnie Shock is also no stranger to how insurance companies work, but that's because it runs in her family. My father happened to be UM, an insurance underwriter, and I'm married to an insurance adjuster UM, so I've been around the industry quite a lot in my life. Bonnie runs the Fox Theater, a one thousand,

one hundred and sixty four seat venue in downtown Tucson, Arizona. Fox, Like Julia, Bonnie submitted a business interruption claim after the pandemic hit, and like Julia, it was denied and the Fox theater actually had an endorsement and its policy that covered communicable disease. So our communicable diseases endorsement, one would think we would have been paid out on, but in fact that it's not the case because um, in that instance, uh, the policy requires that there actually be an incidence of

disease in the space that requires the shutdown. Because this is a circumstance where the shutdown is related to the possibility and the and the UH avoidance of such a of of such an incidence, that that portion of the policy and that endorsement did not pay off. So, just to drive that point home, Bonnie's claim would have been paid out had there been an actual case of COVID nineteen at the theater. The policy requires that there actually be an incidence of disease. But because the Fox was

shut down preemptively to prevent the spread, no dice. If that claim had been paid at the beginning of the pandemic, Bonnie says, the Fox could have avoided a lot of

the struggles that followed. So, um, we are that very particular type of operation that simply cannot operate now, and what we're learning, unfortunately, is just how important that coverage, that that money could have been, because this is going to extend for at least another six months before we feel confident or in any kind of confidence whatsoever that we would be able to start holding events again and

actually earning revenue again. Unlike Bonnie Bobby, Stucky didn't have a lot of experience with his insurer or the insurance industry at large before the pandemic. Stucky is a restaurateur who owns four places in Boulder and Denver, Colorado, everything from fine dining to fast casual pizza. He says when this all started he wasn't really planning for the worst. Well, I think when it first arrived, I think all of us were a little bit of asleep at the wheel.

I mean, I think we had you know, my wife is naturally a nervous nellie and a worry Warton bought mass back in January, bought gloves. But I think we were just going through our typical day. And then it was funny. I was a guest civilier at an event March nine in New York where they had they had people from all over the world. There my wife and I flew there and she gave me a kit to go do wine service that night. She's like, okay, here's your parrel for your pocket. I want you to wash.

You know, like we were hearing about it. But this is how fast it crept up on us. Is That was March ninth or tenth. By the next week, all of America was shutting down very quickly. The gravity of what was happening set in, and shortly after that, the Governor of Colorado, Jared Polis, issued shutdown orders by acting boldly, now we can limit the duration of this economic crisis rather and I will. And I literally told my staff in all Navite, I said, everyone was stressed out. I said,

you know what we're gonna be. Okay, I've been paying business interruption insurance for fifteen years, that's what this is for. I hit send on that the second we get closed by the mayor of the governor, and that's exactly what Bobby did. We got closed, hit send to Farmers Insurance and I've never seen a reply come back that quick from an insurance claim saying UH denied. That's an important detail.

We heard from several business owners who filed claims that their claims were denied really really quickly, like within a matter of hours. Bobby says he thinks this shows how well prepared the insurance industry was for this pandemic. This is not my job to be an expert of insurance, but I do know that I would have expected at least an investigation and maybe an on site visit if

you were going to give a denial that quick. And my gut instinct is when you give a denial that quick, because you can't get that community to all the insurance employees that quick, that was probably premeditated. That they were probably planning this about the time when my wife bought the gloves in January. We reached out to Farmers Bobby's insurer. In an email from their spokesperson, they didn't comment on the speed of their denial, but on Bobby's particular claim.

They did say, quote, in this circumstance, the claim for COVID nineteen related damages, including those resulting from governmental stay at home orders, is not covered under the policy and is subject to applicable policy exclusions. Unquote. That was Bloomberg Law Financial Services reporter Lydia Bayed, So that raises the question what exactly was the insurance industry doing in the

months leading up to the pandemic. In the weeks immediately after all this craziness started, it seems like they really wanted to make sure they did not have any exposure to business interruption claims from stores that were shut down. Were these insurers just twirling their bad guy mustaches while laughing and count seem their policyholders money. No, No, they were not. The truth is it wasn't that the insurance industry didn't want to pay off business and eruption claims.

It was that the insurance felt like they couldn't Blue Brook Laws. Evan Weinberger dug deep into the insurance industry is thinking here, and he explains what was going on this summer. We spoke to Ray Farmer. He's the top insurance regulator in South Carolina and the president of the National Association of Insurance Commissioners. And Ray got right to the point, you know you have an ask, but I'll tell you, in my opinion, of pandemic is not insurable.

That's a line that we heard over and over and over and over again when we were reporting out this podcast. Insurance can help protect you from some really catastrophic events, but a global pandemic just isn't one of them. The reason gets back to what Dan Schwartz, the Minnesota law professor said earlier, the whole correlated risk thing. David Sampson, the head of the American Property casualty insurance is so

siation breaks it down here. In other words, there are just some risks that exists that are not ensurable risks, and pandemics are one of those risks that are at this point in time, largely uninsurable. The insurance product and the insurance industry was never designed and can't design a product that will cover the collapse for the shutdown of

an entire nation's economy all at one time. It's a point that gets at some really fundamental questions about what insurance actually is and what it can and can't do. And make no mistake, if insurers did have to pay out all or even most of the business interruption claims they've received, it's not an exaggeration to say that lots and lots of insurance companies, maybe even most, would go

out of business. Sampson says the entire insurance industry has roughly eight hundred billion dollars in cash to pay any and all claims that may arise. But he says industry data shows that pandemic related losses for just small companies are running at four hundred billion dollars a month. It would end up being a solvency event for the industry and inhibit the ability of the industry to pay for all of the claims that are covered in policies, both

on commercial policies as well as personal lines policies. It would take only a couple of months before all of that statutory surplus is exhausted, and then who's going to be left to pay planes for uh, you know, tornadoes and hurricanement. There's an important point to make here. Some insurers did sell policies that covered pandemics. After all, you didn't get almost anything insured. Used to be common practice for movie stars to ensure their own faces, but the

question is at what price. Here's an example, you know, Wimbledon, that big tennis tournament in England. It's unclear why, but ever since the Stars outbreak, the organizers of the tournament purchased a business interruption policy that specifically covered pandemics. They were covered after this year's tournament had to be canceled, but their coverage reportedly came at the cost of nearly two million dollars a year every year for almost two

decades leading up to this year. Rhonda or In, an attorney with the firm Anderson Kill who represents policy holders and suits against their insurance companies, says, it's irrelevant whether a business could have or couldn't have protected itself before the pandemic. That's a fundamental misunderstanding of the role insurance

is supposed to play in society. She says, who steps forward in a national crisis of this scale is always a capitalist society, a conflict between government and private industry. So you have insurance companies that are supposed to step forward in a crisis, and it sounds like they're pushing back and saying, sorry, this one's too big for us. We're gonna step back now. And where this is the government's problem. This crisis is too huge for a private industry to handle. It has to be handled on the

government level. That is a deep philosophical conversation, really, And she says that would be fine, except the government doesn't treat insurance companies like normal companies. For example, they enjoy lots of perks from the government, like exemptions from antitrust laws. Insurance companies are not supposed to be cutting their lasses when there's a crisis. That is the time for them to step up and say they're here. It's completely backwards for the insurance industry to say, but if we pay,

these losses will go back for him. Well, I guess you didn't do a good risk job with your reserves. Then that is your raison debtre that's what you are. Congress can and does get involved in regulating insurers, but really the lion share of the oversight happens at the state level. Mike Krieedler, the top insurance regulator in Washington State, says he's not happy with how quickly insures our rejecting claims in some cases just hours after they've been filed.

Became clear that the insurance companies were, in my opinion, being somewhat cavalier in their response to their policy holders as to whether they had coverage or not. I made it very clear. I sent out a notice to all of the insurance companies saying, if if you deny a claim for business interruption, you would have a legal obligation to give a thorough and complete answer as to why

you're covered or not covered. But while Creeler made bristle at how the message is being delivered, he ultimately agrees with Samson that this crisis is not something the insurance industry can be expected to handle. As a player in the public sector. However, Creeler is thinking about what all this means. He says it's not tenable to just tell businesses they can't get insurance for any future pandemic shutdowns, because now we all know how devastating a pandemic can

be and how it can hit at any time. If businesses can't ensure this risk, banks won't lead to them. Creeler can already imagine what discussions and boardrooms will be like when companies learn they can't ensure pandemic risk. Listen, we've got to have some kind of coverage here. You know, I can't convince the banks. I can't convince my stockholders that this is a prudent activity. Uh. If we've got this kind of risk cat hang over our head, So

you've got to offer me insurance coverage. That's who's going to have lead the charge. Then with the Congress. Congress is going to feel some hot breath in the back. That's GONDO on this one. We talked about this with Steve Dennis, the head of the Small Business Finance Association. That's a group that represents banks who make loans to businesses like these. He was genuinely unsure how things would play out in the future if small businesses can't get

pandemic insurance. He said, many of the lenders he represents are struggling already and he doesn't know how they'd be able to take on the risk of lending to an uninsured business. Ultimately, Dennis says operating a small business needs to somehow be made less harrowing. The federal government needs to quote send a message to small business owners that it's safe to open their doors unquote. That was Bloomberg Law Financial Services reporter Evan Weinberger. All right, so we've

established that the ball is in Congress's court. All those lawmakers on Capitol he'll have to do is remake the entire property and casualty insurance industry. This is where you have an essentially unstoppable force meeting an immovable object, you have insured saying pandemics are essentially unensurable events because they hit everyone all at once, and you have business owners saying we can't function without insuring the risk of a

future pandemic. Bloomberg taxes. David Hood talked to lawmakers on both sides of the aisle about this and found few signs that they're anywhere close. Believe it or not, there actually is precedent for Congress stepping in and forcing the insurance industry to cover something it wasn't or just creating

a whole new insurance product out of whole cloth. That's basically what happened in the late nineties sixties with the creation of the National Flood Insurance Program and if I P. Congress got tired of stepping in and footing the bill to rebuild communities after floods, but no private company would offer flood insurance. It was that whole correlated risk thing. Remember what Professor Schwartz said earlier, if when they can ensure risks that are not correlated with one another, So

now apply that to floods. In Hurricane Betsy, caused an inflation adjusted eleven and a half billion in damages. That was the final straw the eye of the hurricane crosses key logo heading west. So what Congress did with the n f I P was basically just create its own insurance company. Now, through this program, private companies can sell you a flood policy, but all the premiums go to the federal government and all the claims are paid by Uncle Sam. So that's one possible model, but that might

not be the best model for Congress. According to Vicky Schmidt, she's the top insurance regulator in the state of Kansas. There are some compelling arguments that probably could and should be made that it's not the most well run program, and it's expensive and it can be abused. Vicky's midwesternness is showing. What she's too polite to say is that the n f I P is in deep trouble. Because it's run by the FRONMNT, there's been a strong incentive to keep premiums lower than they should be to avoid

angering voters in coastal states. As a result of this and the results of you guessed it, climate change, the n f I PEOPLE is operating an enormous deficit year after a year seventeen study from the Congressional Budget Office found that in an average year, the program pays out around one point four billion dollars more than it brings in from premiums, which means taxpayers are subsidizing this insurance program to the tune of around one point four billion

dollars a year. Before we're well above working. Of course, it had to be in the range. So even though floods happen more frequently than global pandemics, maybe federally run and pandemic insurance isn't the way to go. There's another option Congress can consider. In fact, they already did it once after the terrorist attacks of September eleven, and we have unconfirmed reports this morning that a plane has crashed into one of the towers. Back then, this is were

in a similar situation to where they are now. They needed to be able to ensure the risk of another terrorist attack happening, but the insurance industry felt they couldn't handle that. Mike Creedler, the insurance Commissioner of Washington State, remembers it, well, the losses could have been really quite unprecedented depending on the Terrorism Act, and getting insurance companies to build that into their into their policies, they found

extremely difficult to do. Um and in order to make sure that you were having adequate coverage for all kinds of losses, including acts of terrorism. Um, the federal government stepped in. What they did was create the Terrorism Risk Insurance Program. Instead of essentially having the federal government issue policies, what Congress did was tell private insurans, hey, you need to issue policies that cover terrorism, but if a terrorist attack actually happens and your claims exceed a certain mount

we the U S taxpayers will cover the rest. In this way, the federal government essentially became what's known as a reinsurer, an insurance company that covers other insurance companies. It's kind of like the insurance industry version of that movie Inception very meta. This can't be done. Dreams within dreams is too unstated. It is possible, so this seems

like a viable option. Tell ensures they have to cover pandemics, but let them know that John and Jane taxpayer will have their backs if the amount of claims gets too big. And actually this is exactly what some lawmakers want to do. Carolyn Maloney, a senior Democrat from New York who sits on the House Financial Services Committee, introduced to bill in May that would create something like the Terrorism and Risk

Insurance Program, but for pandemics. After the terrorist attack on nine eleven, the economy and New York completely shut down. I can tell you you could not even insure a hot dog stand. We couldn't build anything. Everything stopped because insurance companies would not ensure any property against terrorist attacks. But Congress recognized that if companies couldn't get terrorism insurance, then there would be no more construction and millions of jobs would be lost. But even this might not be

palatable for someone capital Hill. Blaine Lucameyer, a Missouri Republican who also sits on the House Financial Services Committee, says without some kind of backstop, Maloney's bill could lead to the government spending a nearly infinite amount of money if another pandemic hits the program that she's outlined. Quite frankly, Uh, and my mind has got a lot of problems with it. And I just really don't see that it's um it's got much of a chance of working. Uh, It's just

not something I think can actually happen. It's poorly structured and costs her you know, holy account. Or do we really have a backstop or do we not have a backstop. This thing with the Luke Myer is ultimately of the school of thought that a pandemic is an unensurable event and the only way to respond to it is to

do exactly what Congress is already doing right now. Number One, is it's something we can actually fix and prepare for, because this is a once in a hundred year event, apparently, is you know, this seems to be the magnitude of this pandemic, seems to be comfortable to nothing until other than one back in the early ninet you know, So how do you prepare for something, you know, just even fifty years in the future, you know, is it something that we're maybe better off just left to responding to

at that moment and just do like we're doing now, just come up with a solution to fix that problem at that point in time, Uh, so that we can continue to exist and get our company, our company's and nan backup in business, you get employees back to work, and get our country up and on again. Of course, this means that all the businesses that we're relying on their insurance policies to save them in a situation like the coronavirus, well, unless the government directly bails them out.

That's it for them. There is another solution, one not quite as fatalistic as Luca Myer's. It would involve simply passing a law requiring insurance companies to pay out all the business interruption claims, both the ones already filed and

ones that will be filed in the future. In other words, lawmakers retroactively go back and essentially take all those virus exclusions that were tucked into all the business and interruption policies and basically obliterate them, putting aside the dubious legality of lawmakers just rewriting existing contracts. Doing this would be extreme, so extreme that few, if anyone, in Congress is even talking about it. But if you travel north a few hundred miles to Albany, New York, Robert Carroll will be

glad to chat with you. He's a state legislator from New York City who has a bill that would mandate retroactive payment of post pandemic business interruption claims. These small businesses of zero bargaining power. A broker comes to them

says you should have this insurance. Sometimes the state, and in New York, the state requires certain small businesses to carry certain um casualty and liability insurance which sometimes business interruption and baked into UM and they pick it out the way you picked the between a Verizon an a T and T cell phone contract, or the difference between a Bank of America and Wells Fargo mortgage. UM. You know you are not negotiating the terms of those contracts.

Carol says, in a way, his bill would prevent the insurance industry from successfully outsmarting its clients. You were smarter, more sophisticated than every small business in America. Kudos to you, but no, we're not gonna let you sit on possibly as much as one point four trillion dollars of reserves, pay out your executives million dollar bonuses at the end of this year, and see economic devastation ripple part our small businesses, especially in our big expensive cities. Carol's bill

is showing no signs of momentum in Albany. Other similar bills than other state legislatures are suffering the same fate. But despite that, the insurance industry seems to feel the threat of this retroactive approach. In earnings calls earlier this year, several industry executives said they will fight legislation forcing retroactive payouts. Christopher Swift, the CEO of the Hartford Financial Services Groups,

frame this debate in existential terms. Any effort to retroactively rewrite these contracts presume coverage where we remove exclusions with threaten the very foundation of the insurance industry. The same to city of contracts under our constitution and the principles of a free market economy. And finally, what does the insurance industry itself want to do well? Its plan would basically take the insurance industry out of the equation altogether.

The industry's proposal would create kind of a piggy bank at the Treasury Department that businesses would gradually pay into. If another pandemic hits, or if COVID nineteen causes another federal emergency order, those companies could make withdrawals to cover lost revenue in payroll. If there's not enough funds, the government would cover the rest. And so the whole idea behind our proposal is, let's learn the lessons from what we're going through right now and design a more systemic,

predictable approach. God forbid that we have future outbreaks of COVID nineteen or other pandemics. That's David Sampson, the insurance industry head who you've heard from earlier. He also said the new Treasury fund would be more effective than insurance. No claims, no forensic investigations into companies, books, no advanced documentation, automatic, fast and easy for everyone. But it doesn't seem like

this is getting much traction on Capitol Hill. Powerful on makers like Maloney's say this wouldn't deal with the problems companies are facing now and that insures should play a more active role. That was Bloomberg Law tax reporter David Hood. And that's what the debate over the future of insurance will look like in the coming weeks, months, and most

likely years. But what about the people who aren't so much worried about the future, but are worried about the present, The business owners who just need money to stay in business. Is there any hope for them? Well, since we talked with them earlier this year, Bonnie, the theater owner in Tucson,

is still presiding over a totally closed theater. She told us she expects the Fox to be closed through the first quarter of next year, and said it's future will depend on some mix of philanthropy and new federal performing arts subsidies. By Be, the restaurant ur in Colorado, has had all of his insurance claims denied. He's suing, isn't sure,

but doesn't have a court date until next summer. And Julia, the cafe owner in Santa Barbara, also hasn't collected on her business interruption claims, but she says she's still watching for new quarantine orders from California Governor Gavin Newsom. She says depending on the exact wording of a future order from Newsome, her insurance policy may finally kick in. Her cafe is still in business, but just for delivery and

pick up with the rent sky high. She's not sure how much longer she can stay in business, but Julia told us we're still here and we're still hanging on. Business Interrupted was produced by myself, David Schultz, along with Lydia Bayoud, Evan Meineberger, and David Hood. Additional help came from Andrew Sadder. Our editors were Josh Block and Adam Allington,

and Josh Block is our executive producer. If you love Business Interrupted or even just liked it, please share it on social media, and also check out our extensive coverage of the insurance industry and lots of other legal issues at Bloomberg Law dot com. And if you like podcasts, and if you've made it this far, I'm sure you do, check out our suite of podcasts. We've got weekly shows on everything from the environment to the Supreme Court. You can find them at news dot Bloomberg Law dot com,

slash podcasts. That's news dot Bloomberg Law dot com slash podcasts. Thank you so much for listening. That was David Schultz from Bloomberg Law and that's it for our show today. For coverage of the outbreak from one and twenty bureaus around the world, visit Bloomberg dot com slash coronavirus and if you like the show, please leave us a review and a rating on Apple Podcasts or Spotify. It's the best way to help more listeners find our global reporting.

The Prognosis Daily Edition is produced by Tophor Forhes, Jordan Gospoure, Magnus hen Rickson and me Laura Carlson. Original music by Leo Sidran. Our editors are Rick Shine and Francesca Levi. Francesca Levi is Bloomberg's head of podcasts. Thanks for listening.