Business Interruption Grant Program Proposed by PA Legislation

May 1, 2020

House Bill 2386, known as the COVID-19 Disaster Emergency Business Interruption Grant Act, has passed in the Pennsylvania House of Representatives.  Bill 2386 establishes the “COVID-19 Disaster Emergency Business Interruption Grant Program” to provide funding for the continued operation of business during and after the COVID-19 emergency.  Bill 2386 was proposed in an effort to address the widespread denial of claims by insurers for business interruption losses as a result of the COVID-19 Emergency.  Business interruption insurance allows a business to file a claim to recoup lost income and associated costs as a result of physical damage to their property that stops operations.  Whether such insurance covers government mandated shut-downs and/or pandemics remains unclear as more fully discussed in our related blog The Battle Over Business Interruption Coverage.  Bill 2386 creates a program through which business owners can obtain assistance similar to if they were able to acquire it through their insurance provider.

According to the Bill, a business is eligible for the grant if it meets the following criteria:

(1) The business has submitted an insurance claim under a business interruption insurance policy and the insurance claim was denied prior to applying for a grant.

(2) The business demonstrates in its application that the business has been adversely impacted by the COVID-19 disaster emergency.

(3) The business is based in this Commonwealth and employs no more than 200 individuals.

Any business that receives a grant must remain open an not lay off any employees for the duration of the COVID-19 emergency, otherwise, the business will bear responsibility to repay the grant amount plus 10%.  Further rules and regulations will be promulgated by the Pennsylvania Department of Community and Economic Development, which will be responsible for implementation of the program.  Bill 2386 now heads to the Senate where its fate remains unclear.

SMGG is committed to remaining at the forefront of these emerging issues.  If you have questions regarding this or any other legal issue, contact Erica L. Laughlin, at elaughlin@smgglaw.com