Under payroll costs, borrowers applying for a PPP loan are permitted to include healthcare and workers’ compensation premiums in calculating the amount of support they’re eligible for. But according to Miller, this insurance relief does not go far enough. In an opinion editorial penned alongside Deanna Johnston, general counsel; VP compliance & HR at Embroker, the pair argue the PPP “should be expanded to include critical commercial insurance” like property, general liability, cyber, directors & officers, and errors & omissions insurance.
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“This makes sense for two reasons,” write Miller and Johnston. “First, the forgiveness provision of the PPP includes the payment of rents, mortgages and utilities – all key for keeping a business running. But insurance is as critical for maintaining minimum business operations. Leases require lessees to maintain property and general liability insurance. Lenders typically required those types of coverage, plus additional coverage specific to the companies’ business.
“Second, as the state departments of insurance have recognized, commercial insurance is critical to all types of business operations. Commercial auto is needed for delivery services. Service contracts require general liability insurance. Cyber insurance is critical given the increased phishing attempts and cybersecurity attacks due to employees working from home. EPLI coverage is needed to protect companies from liability which will likely arise as a result of the changing leave of absence and unemployment requirements under the Families First Coronavirus Response Act, as well as the emerging city, state and federal requirements. We must continue to support the purchase of insurance to protect these businesses from the inevitable lawsuits arising out of the COVID-19 pandemic, as well as supporting ongoing business operations as companies return to work.”
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There has been a lot of coronavirus-related support at state level, with many departments of insurance providing much-needed financial relief to policyholders impacted by the current economic downturn. For example, some insurance departments have issued regulations stopping insurance carriers from canceling or non-renewing policies for non-payment, and others, such as the California Department of Insurance, have ordered premium rebates. While Miller commends these actions in that they ease the financial burden upon small businesses and help policyholders maintain their coverage, he told Insurance Business that the implementation of such measures has been haphazard and may have some unintended longer-term consequences.
“The intention is good in terms of helping policyholders, but we’ve seen the implementation of [relief measures] on a state by state basis be chaotic and potentially even detrimental,” he said. “Any time you create uncertainty in a contract, you create risk of litigation over it. For example, if somebody buys an insurance policy and then doesn’t pay for it, but it’s not cancelled – that would, under the letter of some of these new laws, result in a covered loss. It’s not been tested in the courts yet about whether that contract could be enforced, but it’s a possibility. That’s just one example, but there are all sorts of situations that could arise.
“Over the course of the last month, there’s been a number of different actions by the state departments of insurance to provide premium relief to policyholders or to mandate that insurance companies provide premium relief. Again, the impact of that has not been coordinated at a federal level, and we’re worried about some unintended consequences of changing the way that premiums are calculated. The intention of the regulatory action makes a lot of sense, which is that if there are elements of risk that are lessened during this time, insurance companies should be mandated to rebate some of that. But it’s not exactly clear how that happens, what the calculations are going to be, or how that varies state by state.
“As such, we got to thinking about what might be a better way to provide the same type of financial relief for small businesses in a more coordinated way at a federal level. We believe that expanding the PPP to include property and commercial insurance premiums is a more efficient way of helping small businesses.”
Miller, Johnston and the Embroker team are now encouraging others in the industry, including the National Association of Insurance Commissioners and State Commissioners to support this addition to the PPP. As Miller and Johnston concluded in their op-ed: “Insurance is a critical risk mitigation tool for all businesses under normal circumstances and, in these extraordinary times, it is even more important. Small and mid-sized businesses need money in their hands immediately to pay for insurance to help them weather the longer uncertainty that will result from the COVID-19 pandemic.”
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