State lawmakers and Advocacy Groups Call on Insurance Companies to Deliver on Protection Promises to Small Businesses

Bill would compel insurance companies to honor business
interruption insurance claims filed during the pandemic

Boston – Working with local advocacy groups, State Senator Diana DiZoglio (First Essex) and State Representative Dylan Fernandes (Barnstable, Dukes and Nantucket) filed legislation in both the Senate and the House last week that would provide another much-needed lifeline to small businesses struggling to make it through the COVID-19 pandemic. Both HD 3170 and SD 1845 would require insurance companies to honor legitimate claims around business interruption insurance and do away with virus-exclusion clauses.

At a time when so many small businesses in Massachusetts have had their business operations interrupted in some way, insurers have been strictly denying all claims under business interruption coverage saying the current situation doesn’t fit the insuring agreement; that pandemics are not covered. However, one argument presented by policyholders, and amplified by nationwide hospitality industry advocacy group THIRST, is that it was not the pandemic that forced their closure – state orders did, triggering additional coverage under most policies called “civil authority action” which is covered by most business interruption insurance policies.

THIRST was founded in early 2020 to help owners in the hospitality industry lobby for protection they have paid for after there were widespread reports of insurance companies denying business interruption claims from small restaurants and bars across the country. Senator DiZoglio’s and Representative Fernandes’ offices worked with the THIRST’s Massachusetts Chapter to rework and bolster a similar bill that was introduced into last year’s legislative session.

“This essential piece of legislation is crucial for protecting our small businesses, who have faced one challenge after another throughout this pandemic,” Senator DiZoglio said. “It is unacceptable that our local mom and pop shops pay insurance claims to protect against incidents of this nature while not being permitted to access much-needed funds. Insurance companies have done just fine during this emergency – and are sitting on significant money, set aside to pay out claims like these, that our small businesses desperately need. I am hopeful we will get this bill passed and on the Governor’s desk as soon as possible.”

THIRST Massachusetts State Organizer Christopher Almeida explained, “according to the Insurance Information Institute the insurance industry is sitting on close to $800 billion in reserves and it would take less than half of that to pay out the legitimate claims made by the small businesses that have paid tens of thousands of dollars a year for this coverage.” Almeida who also manages a bar in Plymouth went on to say, “we are really hopeful that this bill will have a much-needed positive impact on small business here in Massachusetts,”

The impact of reduced patronage and income on an individual and business level is bad enough, but those losses will have a broader impact on our state economy and be felt by every local community across the Commonwealth. “The pandemic has shuttered more than a third of small businesses across the state, devastating our local communities. These businesses pay for business interruption insurance every year, but insurance companies have refused to cover losses related to the pandemic,” said Representative Dylan Fernandes. “Small businesses are experiencing unprecedented pain while the insurance companies that are supposed to help them are making a profit and sitting on a pile of cash. This legislation works to ensure that insurance companies do their job and provide support to our local small businesses during a time of great need.”

Amanda Converse, CEO of Love Live Local, a local business advocacy organization on Cape Cod, joined THIRST’s efforts in September when she heard from many small businesses that this kind of legislation would be a “game changer” for them. “Most small businesses have limited cash on hand that hasn’t begun to cover their lost revenue as a result of this public health crisis, and funding from various government agencies has been difficult to access or failed to address the long-term nature of the pandemic.” She went on to say, “saving these restaurants cannot simply fall on consumers to eat out, get takeout and buy gift cards. This continues to be a state of emergency and we need all-hands-on-deck”

The Massachusetts Restaurant Association has also offered its support for the bill.

“Unpaid business interruption insurance claims continue to be a punch in the stomach for the battered restaurant industry, an industry that has felt the most devastating impacts of the pandemic,” said Stephen Clark, vice president of government affairs for the Massachusetts Restaurant Association. “Restaurant operators dutifully paid interruption insurance premiums, only to have those claims rejected or ignored when they were truly needed. This issue is being played out in courtrooms across the country, and we are glad to see the Massachusetts legislature continue to look for ways to address this ongoing frustration.”