Pandemic Risk Insurance Proposals Include House Legislation Modeled on TRIA
House Democrats and the insurance industry recently released separate proposals aimed at expanding the availability of pandemic-related business interruption insurance. (Bloomberg Law, May 28)
- Legislation introduced on May 26 by Congresswoman Carolyn B. Maloney (D-NY), above, senior member of the House Financial Services Committee, would create the Pandemic Risk Reinsurance Program – a federal backstop that would provide capacity for pandemic risk insurance and maintain marketplace stability with the private sector, modeled after the Terrorism Risk Insurance Act (TRIA).
- Rep. Maloney’s bill – the Pandemic Risk Insurance Act of 2020 (PRIA), H.R. 7011 – has 20 Democratic cosponsors, including four who serve on the House Financial Services Committee. (PRIA Section-by-Section Summary, Bill text and Rep. Maloney news release).
- Rep. Maloney commented on the introduction of PRIA this week with stakeholders during a remote news conference. “We want to solve a market failure by allowing companies to purchase business interruption insurance that covers pandemics so that they can stay in business and keep their workers employed. To solve this marketplace failure, we need to create a federal backstop just like we did with TRIA,” said Rep. Maloney. “That’s why I’ve introduced the Pandemic Risk Insurance Act. This will help relieve some of the economic losses that business are suffering and will protect businesses and the economy from future pandemics.” (PRIA introduction video, May 26)
- Under PRIA, Maloney stated. “… policyholders and insurers and the federal government will share the risks. With this backstop, the insurance industry will have more certainty and will be able to safely underwrite this unique risk.” (PRIA Section-by-Section Summary)
- Rep. Maloney also noted the insurance industry’s May 21 proposal for a federal program to help businesses meet the financial challenges from future pandemics. “It was encouraging to see last week the insurance industry’s agreement with so many members of Congress and policyholders from across the country that pandemic insurance is a viable, actuarially sound product – and that there is an immediate need to create a mechanism to provide relief for millions of struggling business owners.”
- The insurance industry-backed Business Continuity Protection Program, proposed in advance of Rep. Maloney’s PRIA bill, would provide revenue replacement assistance for payroll, employee benefits and operating expenses following a presidential viral emergency declaration. (National Association of Mutual Insurance Companies news release, May 21)
- The proposals from Rep. Maloney and the insurance industry are prospective, and do not address losses associated with the current coronavirus pandemic. The Trump administration, lawmakers and state insurance regulators have warned against measures that would have insurers retroactively pay for current pandemic claims. (Politico, May 21 and Insurance Journal, May 27)
- The Real Estate Roundtable, along with its industry partners, continues to work constructively with policymakers and stakeholders to develop and enact an effective pandemic risk/business continuity program.
Pandemic risk insurance will be a policy focus during The Roundtable’s Remote Annual Meeting and policy advisory committee meetings on June 11-12.
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Protection from Frivolous Lawsuits Key to Economic Recovery, Business Groups Urge Congress
A multi-sector coalition including real estate, tourism, technology, manufacturing, health care, and energy sector groups – led by the U.S. Chamber of Commerce – called upon Congress in a May 27 letter to enact temporary liability protections for businesses struggling to reopen and operate safely during the COVID-19 pandemic.
- The letter explains that American businesses face risks of frivolous litigation that will impede the nation’s path to economic recovery. “Absent a targeted safe harbor for [businesses] that work to follow applicable guidelines, the fear and uncertainty from boundless liability threatens to impede our country’s social and economic recovery,” the groups explain.
- The Chamber-led coalition emphasized that “recourse for those harmed by truly bad actors who engage in egregious misconduct” must be preserved. Reasonable and temporary liability protections should also be offered for:
(1) businesses, nonprofit organizations, and educational institutions that work to follow applicable public health guidelines against COVID-19 exposure claims;
(2) healthcare workers and facilities providing critical COVID-19-related care and services;
(3) manufacturers, donors, distributors, and users of vaccines, therapeutics, medical devices, as well as PPE and other supplies (such as hand sanitizer and cleaning supplies) that are critical to the COVID-19 response; and
(4) public companies targeted by unfair and opportunistic COVID-19-related securities lawsuit
- Among the more than 200 signatories to the letter are The Real Estate Roundtable, American Hotel & Lodging Association, International Council of Shopping Centers, National Apartment Association, National Association of REALTORS®, and the National Multifamily Housing Council.
- Additionally, Building Owners and Managers Association (BOMA) International wrote to congressional leaders on May 27, urging them to consider business protections developed in response to prior emergencies like 9/11 as a guide for responding to Covid-19-related liability issues. (BOMA letter on business liability)
- “A tailored, specific legal safe harbor program for those in the commercial real estate sector, who are following public health rules, directives, and guidelines, making plans, and implementing protective measures, will support ongoing recovery efforts,” BOMA’s letter explains.
- Senate Majority Leader Mitch McConnell (R-KY) and House Minority Leader Kevin McCarthy (R-CA) said in a joint statement early this month that any future Covid-19 relief legislation must include liability protections for employers and businesses. (See Roundtable Weekly, May 1)
- Senator John Cornyn (R-TX) emphasized the GOP’s position on May 18, stating on the Senate floor that “Leader McConnell and I … are working on a proposal that would put common sense reforms in place and protect those acting in good faith from being sued into oblivion.” (Cornyn statement). Potential employer immunity and anticipated litigation related to Covid-19 were the focus of a May 12 Senate Judiciary Committee hearing. (Roundtable Weekly, May 15).
Several states have implemented or are considering pandemic-related liability protections that could provide a direction for federal legislation. Utah, for example, provides law suit immunity to businesses except in cases of reckless or intentional misconduct. (Salt Lake Tribune, May 4)
Roundtable Members Continue to Drive the “Re-Entry Discussion”
Roundtable Immediate Past Chair Bill Rudin (Co-Chairman & CEO, Rudin Management Company, Inc.) today joined CNBC for a conversation about the path forward for re-populating office spaces in New York and cities nationwide.
- Citing recent industry surveys, Rudin said, “Over 75% of the employees want to come back to work. They want to be with their co-workers and interact and have that cohesiveness that is missing right now.” He added, “We're optimistic that when we get through this the office building will still be a central hub for creativity and entrepreneurship.” (CNBC Squawkbox, Twitter, May 29)
- In recent weeks, Roundtable members have shared their perspectives and experiences with a number of media platforms regarding workplace re-entry strategies and technologies. (Roundtable Weekly, May 15) Such questions are complicated by an evolving patchwork of state-level laws and guidance. (New York Times Interactive Map, “See How All 50 States are Re-Opening” )
- The Centers for Disease Control and Prevention (CDC) has issued recommendations for American employers preparing to reopen their offices as states begin to lift their lock-down orders. [CDC, Interim Guidance for Businesses and Employers Responding to Coronavirus Disease 2019, (May 2020] CDC recommends various steps such as checking ventilation systems, increasing outdoor air circulation, ensuring employees maintain six feet of separation through physical barriers, staggered worker shifts, enhanced clean and disinfecting practices, and conducting employee health checks and screenings.
Business liability and building re-entry are crucial issues affecting commercial real estate operations in the Covid-19 era. They will be discussed during The Roundtable’s virtual Annual Meeting on June 11-12, which will include remote events for both business and policy advisory committee meetings.
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House Passes Bill to Relax Restrictions on Small Business PPP Loans
The House of Representatives yesterday overwhelmingly passed legislation (417-1) intended to ease restrictions on Paycheck Protection Program (PPP) loans to help small businesses keep workers on payroll with benefits during the coronavirus outbreak. (The Hill, May 28)
- The House’s Paycheck Protection Program Flexibility Act (H.R. 7010) would allow small businesses to apply for loans and rehire laid-off or furloughed workers through December 31, 2020 – a six month extension to the original June 30 “covered period” deadline enacted as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act in March. (Roundtable Weekly, March 27).
- H.R. 7010 would make other changes that offer greater flexibility for PPP-eligible businesses, including:
- Extending the loan forgiveness period from eight weeks to 24 weeks after origination;
- Extending the PPP re-payment period to five years, for small businesses that do not receive loan forgiveness;
- Allowing PPP loan recipients to take full advantage of deferral of employment taxes through the end of 2020; and
- Allowing small businesses to receive forgiveness for up to 40% of PPP loan amounts used for rent and other non-payroll expenses.
- The Roundtable joined a broad coalition of organizations supporting the flexibility bill – as originally introduced – that would have given small businesses greater discretion to decide how to best apportion PPP proceeds to help pay rent obligations and other ordinary operating expenses. (Roundtable Weekly, May 22)
- The original bill would have completely eliminated the so-called “75-25 Rule.” The rule’s name derives from a Small Business Administration (SBA) regulation that currently requires a qualifying business to use at least 75% of PPP proceeds for payroll and benefits, and no more than 25% for rent, mortgage interest, and utility payments. (See RER’s “8-Point Plan to Reform the PPP”)
- H.R. 7010 as passed by the House yesterday defaulted instead to a “60-40 Rule.” According to Politico, “Democrats scaled back [the] initial version of the bill to address complaints from labor leaders that it would have given businesses less incentive to hire back workers.” (POLITICO, May 28)
- With the Senate scheduled to come back in session on Monday, it could vote next week on its own bipartisan legislation to modify the PPP, the Paycheck Protection Program Extension Act (S. 3833). Like H.R. 7010, the Senate version would increase the PPP forgiveness period – but only by 16 weeks. The Senate bill would not address changes to the “75-25 Rule” at all. (Journal of Accountancy, May 25)
- A bipartisan group of Senators led by John Cornyn (R-TX), meanwhile, is on record to move the “75-25 Rule” to a “50-50 Rule” where up to half of PPP loan proceeds could be used by a business to pay rent and other non-payroll fixed expenses. (Cornyn press release, May 6)
- Treasury Secretary Steven Mnuchin has expressed the Administration’s opposition to changing the “75-25 Rule.” “Let me just remind people it’s called the Paycheck Protection Program, it's not called the overhead protection program,” Mnuchin said in a May 21 interview for The Hill. “It was designed that you got eight weeks of payroll plus 25 percent for overhead, which we thought was a reasonable amount.”
House Majority Leader Steny Hoyer (D-MD) claimed earlier this week that House and Senate negotiators are nearing agreement on PPP reforms. (Bloomberg, May 26). A recent “tracker tool” released by the American Action Forum charts the allocation of PPP loans since the program’s inception in March.
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