A provision that would have compelled business insurers to pay business interruption claims filed because they were legally forced to close due to the pandemic was pulled from the emergency legislation passed by DC Council April 5 due to a lack of support.
Introduced by Ward 6 Councilmember Charles Allen (D), the provision would have applied to those businesses that had interruption protection in their policies. Saying a fix was needed, Allen said that insurers were not as affected by the pandemic as small business. He said the provision was about siding with local business.
Similar legislation has been proposed in states including New York, Louisiana, Ohio and Massachusetts.
“Who is it we’re trying to help? We’re trying to help our local businesses, our small business,” Allen said. “I think when it comes to ‘whose side are we on’, we want to fight for our local businesses.
Other Councilmembers said they worried the legislation would provide false hope where real support was needed, a view expressed by Ward 5 Councilmember Kenyan McDuffie (D). Others wondered if Council had legal grounds for such a provision.
Councilmember May Cheh (Ward 3-D), a professor of constitutional law, said that she was certain that this provision would become bogged down in the courts because of the constitutional contract clause, which forbids states to make laws impairing the obligation of contracts.
Noting that businesses had already brought claims against insurers arguing that they are contractually entitled to payment, Cheh said the provision could affect the success of that legal process. “They also have an interpretive argument about what their policies actual cover,” Cheh said of businesses seeking payment, “and I’m worried that will also get bound up in this fight over whether we do this, and its constitutionality.”
Council agreed to re-examine the feasibility of the provision over the coming weeks.
You can see the circulated version of the legislation on Chairman Mendelson’s website.