DC Council may Compel Insurers to Pay Business Interruption Claims

It may also Require Landlords to Offer Tenant Repayment Plans

DC Council Chairman Phil Mendelson introduced a Bill yesterday (04/30) requiring insurers to honor claims for business interruption insurance for businesses that had fewer than 100 full-time employees working 25 or more hours per week as of March 1, 2020.

The provisions in the Bill take effect if the business purchased an insurance policy covering loss of use and occupancy and business interruption, so long as the claim concerns losses arising from the COVID-19 pandemic. The Bill, if enacted, will require coverage regardless of any exclusion set forth in a policy for viruses and regardless of whether there is physical damage to the property of the insured.

The Bill also requires commercial and residential landlords with five or more rental units to enter into payment plans with eligible tenants for rents coming due during the COVID-19 public health emergency and for one year after the public health emergency declaration expires. Payment plans must be for a minimum length of one year and provide for payments in monthly installments, with no lump sum payment.

While Landlords may require tenants to provide supporting documentation of financial hardship resulting from the pandemic to justify the payment plan, Landlords are prohibited from refusing payment plans from otherwise qualified tenants due to existing delinquencies or a future inability to make rental payments (even if the inability was established before the pandemic). The Bill also imposes reporting requirements related to payment plan offerings and restrictions on reporting tenant delinquencies for commercial and residential landlords, and for residential landlords, additional obligations to clean common areas and refund amenity fees charged for amenities that are unavailable during the pandemic.

A copy of the current draft of the bill is accessible here: http://chairmanmendelson.com/2020/04/30/request-to-place-measures-on-the-agenda-for-the-may-5th-legislative-meeting-coronavirus/.

The proposed legislation expands upon earlier legislation by the Council to freeze commercial rent increases for the duration of the public health emergency and for 30 days thereafter. More information on the prior legislation, which is currently under Mayoral review until May 6, 2020, can be found at “DC Council Freezes Commercial Rent Increases.”

Lerch Early will monitor the next Legislative Session of the D.C. Council on May 5, 2020 and will provide an update on the status of the draft Bill.

Ashley Haun is a real estate attorney who counsels investors and owners on the purchase, sale, financing and leasing of commercial real estate assets in the Washington metropolitan area. For more information, contact her at 301-657-0152 or [email protected].