How To Sign New Jersey Banking Living Will

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as business owner shut their door many are finding that their insurance plans don't cover pandemics right now regulators and lawmakers are stepping in to try and help Americans get the cash that they need to survive but it is creating all kinds of problems and raising risks for the insurance industry - joining us right now to chat about the insurance industry is Eric Donato he's the chair of the insurance regulatory practice at Debevoise and Plimpton he also is the former New York State Insurance Superintendent he was there during the financial crisis and we talked to him pretty frequently during that because that was kind of front and center for what was happening - during the financial crisis Eric it's good to see you today thank you for joining us thank you this is really turning out to be a big mess yeah this is on what we've talked about before it's the expectation gap between the policyholders and the insurance companies and obviously policyholders are now scrambling around trying to understand what kind of coverage they have and generally business interruption insurance requires some kind of physical direct physical damage to the property and even if you get over that hump and say that the virus is really like a physical manifestation many of these policies have pretty strong exclusions for pandemic epidemic and viral causations and now people are starting to look at what we I don't think we talked about this last time but there's another form of insurance in these commercial policies called civil authority insurance which is where the state comes in and says you can't enter your premises or a business say there's been a gas leak or an explosion on the block and they closed down the whole block and your business or your home is there it's by civil authority and there are policies that have civil authority insurance which is arguably more akin to what we're going through now with all the state and city orders and federal orders but that also may have exclusions for pandemic and epidemic I try and weigh through this because it's it's a big morass I can understand a business owner thinking hey I thought I had insurance for business interruption for something like this maybe they have a valid point to say I thought this was covered but I can also understand the insurance company saying wait a second we wrote premiums based on the idea that we weren't covering this if we had been covering this we would have had to charge you a lot more for insurance along the way as a regulator how do you come down on this so I I tend to come down on the insurance side not because I'm just instinctively Pro insurance but the pricing would have been just tremendous this is a very very expensive form of insurance if it doesn't have these exclusions we see the reasons now and many many regulators were authorizing the exclusions in other words they knew about the exclusions they supported the exclusions I think there were even states where you were not even allowed to write business interruption insurance without the exclusions because the regulators didn't feel comfortable because of the risks towards solvency etc so it's not like I'm taking sides but it seems to me pretty obvious that the insurance industry really really thought this out tried to be Prudential about it they're not trying to deny claims just to deny them their view is there really was never coverage for this and there needs to be some other solution some of which we've talked about before but I think that that's sort of how as I would view it as a former regulator but then as you know there's legislators out there there's politicians that are seeking to pass and propose legislations that would retroactively lis undo the exclusions and that's where you have tension between the regulator's the policymakers the legislators the companies and the insurance companies well that's a huge question what legislators are now looking at I know that's happening in the state of New Jersey lots of other states too what would happen if some of those states were successful in in retro actively saying you never really wrote the policy to cover this but you're responsible anyway because you've got the money what happens at that point so what what would what would happen in there's different versions there's an I think there's an Ohio version Massachusetts New York and New Jersey so far but they all basically do it you just said they maybe create some kind of fun but the industry ultimately you would pay for the fund so I think what you end up with frankly is lawsuits right a lot of insurance companies will fight back and say that it's frankly a takings it's unconstitutional there's something in the Constitution called the contracts clause which was a post Revolutionary War clause to stop States and and and eventually the federal government from coming in and aggregating contracts but without both parties agreeing to it so there are even constitutional challenges to it it would be a serious serious issue and I think it would and in some sense I'm not sure it would be healthy in the sense that it would rattle the insurance industry they would say we did this as carefully as we could you know if you want to do a prospective fix like you know they had to do with terrorism and the terrorism reinsurance act of the federal government you know give us a backstop give us a ceiling and we're happy to walk in and write this insurance but without that kind of an approach they are very exposed if if these states do this kind of rollback I actually wonder what it would mean for how many insurance companies would continue to write any sort of covers in coverage for business in states that that actually follow through with something like this yeah the New Jersey statute is interesting because it presupposes it almost accepts the validity and the strength of the exclusions it's not like a great fight with them a gray area fight they really seem to in their statute just assume that they're there assume they're impenetrable as an exclusion but then just retro actively roll it off and say the insurers have to pay look I'm very sensitive to the frustrations of people and I would that's why I think when we first talked I could see this expectation gap coming because you know exclusions and covered peril and all these technical terms are hard for the public to get their arms around and I agree with what you kind of opened with probably people expected that this was what they had the insurance for but this is also the kind of exposure that could really really endanger the insurance system if it's not managed carefully and that there's not some respect for the validity of the contracts Eric I do understand that perspective look I paid for business interruption coverage I've been paying my premiums on that my business is interrupted what do you mean I didn't read closely enough and didn't dig down on it yeah and that's why also there's a there's another party in all this to remember there's also the insurance brokering industry so generally in between although not exclusively but in between the carrier the insurance company and the business owner there's a broker and that's why when you see the letters to Congress a lot of them are also co-signed cope promoted by the brokering industry because many of the regulator's like New York are saying and they're frequently asked questions section on their website they're saying speak to your brokers see what your coverage is they're acknowledging that there is an expert that's also involved here besides the insurance company and the and the commercial owner um but I I understand that I don't want to I don't want to diminish the frustration at all or in any way say that people are probably not disappointed and there is this expectation gap but I think that one then has to sort of admit that we have a national issue on this as I think I said previously it feels like it needs a national solution both retro actively and prospectively retroactive Lee would be some kind of federal fund or something that would go to help these business owners and not and not disregard the contractual provisions of the insurers and some kind of prospective relief all some kind of truth be a solution so that the industry can start to write this again because I bet I would predict that increasingly borrowers are going to face lenders and mortgages who are going to require this kind of insurance and then if the industry doesn't write it your that have a real ding on commercial activity that they're after you you