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Regulator: Insurance won’t cover most Md. business losses from pandemic

A pedestrian walks by The Family Barbershop, closed due to a Gov. Gretchen Whitmer executive order, in Grosse Pointe Woods, Mich., Thursday, April 2, 2020. The coronavirus COVID-19 outbreak has triggered a stunning collapse in the U.S. workforce with millions of people losing their jobs in the past two weeks and economists warn unemployment could reach levels not seen since the Depression, as the economic damage from the crisis piles up around the world. (AP Photo/Paul Sancya)

A pedestrian walks by a barbershop closed because of the pandemic. (AP Photo/Paul Sancya)

Maryland businesses that have been closed for nearly two months as a result of the COVID-19 pandemic likely will not be able to recoup those loses through insurance.

Nationally, businesses are losing an estimated $400 billion per month as a result of the pandemic. And while estimates in Maryland are not immediately available, Robert Barron, associate commissioner for property and casualty with the Maryland Insurance Administration, said the business community will feel the pinch.

“Maryland’s business community is experiencing the same substantial hardships faced by businesses of all types and sizes across the country due to the economic impact of COVID-19,” Barron told members of the Senate Finance Committee during a virtual briefing Tuesday.

Gov. Larry Hogan issued a stay-at-home order and closed all non-essential businesses 50 days ago. Even after announcing the lifting of some restrictions, some businesses are unable to open. Some larger, harder-hit counties have kept in place the stricter measures lifted by the governor on Friday.

The governor and some local government leaders are facing increased pressure by workers and business owners who want to get back to work.

Barron said it became apparent to state insurance regulators “that the single biggest property and casualty issue arising from COVID-19 would be the scope of lost business income or interruption claims.”

Nationally, combined estimated business interruption losses for just the small business market total $400 billion. The monthly costs exceed the $290 billion in property and casualty loses in the United States for 2018 and 2019 combined, according to Barron.

“In other words, a single month of COVID-19 small business and (business interruption) claims is 35 percent higher than two years of all flood, earthquake, hurricane, tornado and wildfire losses combined,” Barron told the committee. “The scope is enormous.”

Businesses will be unlikely to recoup those costs through their insurance, said Barron, who told the committee that reviews of commercial policies “confirmed that in most cases, business interruption claims by businesses of all sizes would be denied due to the absence of physical damage from a covered peril at the insured premises and in most cases additional exclusionary language within the policies specifically related to loses involving bacteria, pandemic and virus.”

“Certain risks of loss are just too great for insurers’ underwriters to price at a level that allows for protection of basic insurance coverage needs to be affordable. For this reason, these types of risks have always been excluded from property and casualty insurance policies including the risks associated with pandemics and virus going back to the SARS and swine flu events of more than 10 years ago,” said Barron.

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