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FMG reported extensively after New Jersey began debating a bill that would force insurers to cover Business Interruption losses arising from COVID-19. The New Jersey bill would require courts to ignore virus and bacteria exclusions, or other policy language that might exclude such losses.
Now legislatures in other states are joining that effort.
New York: Assemblyman Robert C. Carroll, whose district covers parts of Brooklyn including Park Slope, introduced A10266, an Act “requiring certain perils be covered under business interruption insurance during the coronavirus disease 2019 (COVID-19) pandemic.” The bill starts by saying it applies “[n]otwithstanding any provisions of law, rule or regulation to the contrary.…” It goes on to decree that any policy of insurance insuring against loss or damage of property that includes the loss of use and occupancy and business interruption, must treat such interruption as a “covered peril” during a period of “declared state emergency due to the coronavirus disease 2019 (COVID-19) pandemic.”
The New York bill appears designed to nullify the 2006 ISO exclusion on losses for virus or bacteria. Assemblyman Carroll wrote an op-ed stating that it is “…unconscionable that insurance companies that were bailed out in 2008 won’t pay out… because they say ’viruses’ were either explicitly carved out of policies or because adjusters claim a ‘virus’ is not a ‘physical’ interruption.” Like the New Jersey bill, the New York law would apply to businesses with less than 100 eligible employees and calls for funds to be collected and made available for relief and reimbursement for insurers who must pay claims under this Act. Such funds would be collected from the insurance companies themselves in a special purpose apportionment. It would be retroactive to March 7, 2020.
Carroll is calling for the New York State Legislature to push off passing a state budget until COVID-19 related policy issues are addressed. Such a measure is essentially the only way that the law could pass in this legislative session, and it would still be subject to constitutional challenge.
Massachusetts: The Massachusetts legislature is considering another bill that attacks the virus exclusion, and states that “…no insurer in the commonwealth may deny a claim for the loss of use and occupancy and business interruption on account of (i) COVID-19 being a virus (even if the relevant insurance policy excludes losses resulting from viruses); or (ii) there being no physical damage to the property of the insured or to any other relevant property.”
The bill’s application is limited to policies issued to businesses in Massachusetts with 150 or fewer full-time employees. It would also apply only until the termination of the state of emergency declared in the Governor’s March 10, 2020 Executive Order 591.
The Massachusetts bill also creates a reimbursement process. Before it can be passed in the current session, the legislature must first grant the bill special emergency status.
To FMG’s knowledge, the Massachusetts bill is the first of its kind to tie COVID-19 denials to unfair practices. It specifically invokes the provisions of M.G.L. c. 176D, which regulates unfair practices by insurance companies, creating the potential for substantial penalties on insurers.
Ohio: HB No. 589 also would require insurers offering business interruption insurance to cover losses attributable to COVID-19.
If passed, the Ohio bill would provide that “every policy of insurance insuring against loss or damage to property, which includes the loss of use and occupancy and business interruption, in force in [Ohio] on the effective date of this section, shall be construed to include among the covered perils under that policy, coverage for business interruption due to global virus transmission or pandemic during the state of emergency.”
It also would require that “[t]he coverage required by this section shall indemnify the insured, subject to the limits under the policy, for any loss of business or business interruption for the duration of the state of emergency,” which the bill defines as “the state of emergency declared under Executive Order 2020-01D, issued on March 9, 2020, to protect the well-being of Ohio citizens from the dangerous effects of COVID-19.”
The bill would limit its effects only to insureds: (1) located in Ohio; and (2) who employ 100 or fewer eligible employees; and (3) are covered by a policy in force on the effective date of this section.
Like the other bills in this category, Ohio’s bill would allow insurers who pay applicable COVID-19-related losses to request from the Ohio Superintendent of Insurance “relief and reimbursement from funds collected and made available” for the purpose of the bill. Further, the bill would require the Superintendent to assess all Ohio insurers for the funds needed to satisfy eligible reimbursement claims.
Federal reaction: At the federal level, Congresswoman Mikie Sherill of New Jersey signed a bipartisan letter to the heads of various industry groups urging them to consider coverage of such claims. Sherill told The Daily Beast that Congress is monitoring the issue and may include specific aid for business interruptions in a future stimulus bill.
We will continue to see these bills rolled out as Covid-19 claims increase. We will likely see a second round of such bills in the fall, once the pandemic has ceased enough for Americans to begin to see the toll of Covid-19 losses on local restaurants and small businesses, particularly if Congress has not acted.
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