Trade bodies slam Washington retroactive BI bill as 'unconstitutional'

Industry trade bodies representing property and casualty insurers have strongly opposed a newly introduced bill in Washington favouring small businesses initially denied business interruption claims due to COVID-19, calling it "unconstitutional".

Washington lawmakers have introduced SB 5351 legislation to mandate retroactive business interruption coverage in commercial property policies for COVID 19.

Trade associations the American Property Casualty Insurance Association (APCIA), the National Association of Mutual Insurance Companies (NAMIC), and the Northwest Insurance Council (NWIC) have voiced strong objection to the bill, stating that mandating retroactive BI coverage could undermine the stability of the insurance marketplace and the state’s economic recovery.

“Mandating retroactive business interruption coverage to include COVID-19 losses that were never intended to be covered by the insurance contract would undermine the ability of insurers to meet their promises and pay claims on all existing insurance policies," the trade bodies said in a joint statement. "This could cause more harm to Washington’s economic recovery and threaten insurers ability to pay for every-day catastrophes such as wildfires."

The associations slammed the legislation as "constitutionally flawed" that could potentially threaten the stability of the insurance sector.

“Business interruption insurance refers to property insurance policies that cover physical damage, such as from wildfires and tornados. These policies are not intended to cover diseases or pandemic related losses," the trade bodies argued.

"In the vast majority of cases, insurers did not price policies to include such coverage, and policyholders did not pay for this coverage. Policies are stringently regulated by the Washington Office of the Insurance Commissioner."

APCIA, NAMIC and NWIC asserted that they "will aggressively defend against any attempt to undermine contracts, or violate basic due process, government takings, and contracts clauses of the U.S Constitution, as well as the Washington State Constitution."

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