The Council of the District of Columbia has withdrawn the section of a bill that would require insurers to grant coverage for some small businesses impacted by the local public health emergency, though it may revisit the proposal later.

The business interruption section of the Coronavirus Omnibus Emergency Amendment Act of 2020 as currently written would have forced insurers to cover 50% of losses incurred from May 15 and been applied to policies in force as of March 25. Eligible policies would have to have been issued to relatively small businesses that had fewer than 50 full-time employees.

Insurers would be unable to deny a claim for loss of use and occupancy, lost business income or business interruption due to losses resulting from actions taken in response to public health emergency declarations and the lack of direct physical loss or physical damage to property and business premises.

The provision would also have given the D.C. insurance commissioner the authority to make assessments to those insurers that provide business interruption coverage in the city on a pro-rata basis.

Debate over the business interruption provision lasted almost an hour before the section, which was changed multiple times over the past week, was ultimately withdrawn. Many council members expressed discomfort over the business interruption amendment, citing the "sense of false hope" it could send to small business owners who need immediate relief.

"I don't think this provision is going to do it and might have the reverse effect of doing harm both with the cost of insurance and sending a false sense of hope when it's going to be bogged down with litigation for years," said Kenyan McDuffie, chair pro tempore of the council.

Council Chairman Phil Mendelson said the district attorney's legal counsel division said the council would have the authority to enact such a provision since and bypass constitutional contract law given the emergency circumstance. The memo was not given to every member of the council.

But Councilmember Mary Cheh said she felt that even though the council would have a good legal argument it would "not be a slam dunk by any means." Cheh also serves as a tenured law professor at George Washington University and specializes in constitutional law.

Cheh said it felt like the provision would represent only "symbolic assistance" since it would likely get stuck in court.

Industry trade groups such as the National Association of Mutual Insurance Companies have been clear that they strongly oppose the bill. Erin Collins, NAMIC's vice president of state affairs, told S&P Global Market Intelligence that the group was "gratified" to see the measure pulled.

"We're glad to see the wisdom of the council in moving the package without that mandate of forced insurance coverage," Collins said. "That provision would have been damaging to the district's insurance market and would have harmed the city's consumers ultimately."

Although the council went through several iterations of the provision to restrict the cost and businesses that might qualify for payment, Collins said NAMIC does not support any "intrusion" into the insurance contract to force coverage of uncovered perils. Any form of the measure would have cost insurers "hundreds of millions of dollars a month."

Councilmember Charles Allen, who wanted to pass the business interruption provision, said he was frustrated that the council had allowed the insurance industry to "frame" the conversation.

The council ultimately passed the rest of the bill with some added oral amendments, but without the business interruption provision.

The wide-sweeping bill also mandated changes in other sectors, such as requiring electric companies to offer special payment plans for customers who demonstrate evidence of financial hardships directly or indirectly related to the public health emergency, and capping the commission fee that a third-party delivery platform charges a restaurant.